Empirical view on Nifty - period May - July

A friend recently told me that markets tumble in May and recover on early monsoons. This is the usual sentiment amongst all. To confirm, I went back to read the charts of Nifty for the past 15 yrs. What follows is my observation of the weekly charts for the period May to July, 1995 till date ...

1. From 1995 to 1999, Nifty followed a cyclical trend of falling every alternate year and rallying in the next.

2. However, where Nifty should have tanked in May 2000, it rallied instead. It did not follow the preceeding trend, and made way for the begining of a new cycle. I believe the "Macro" reason being, that Nifty futures were launched in June 2000. Also with the introduction of online trading platforms and huge FII inflows, the markets showed an upside of approx 30% in just 2 months time.

3. This new cycle that began in the new millenium did not last long. In the year 2002, conventionally we were to witness a rally. Instead, Nifty retraced about 15%. The big events that preceeded this fall were suspension of UTIs US-64 in 2001 and VSNL disinvestment in Feb 2002.

4. Since 2002, Nifty followed the rule of falling and rallying alternate years religiously.

Also, no established link between the percentage of gain/loss was found in the markets per se. The maximum that Nifty has rallied upside in these 3 months was approx 38% in the year 1999. Later, the KP scam was associated with the period 1999-2001. Since then, the 35% approx upside seen in period May - July 2009, has been the highest.

The maximum flipside was however approx 28% in May - July 2008, post the credit bubble burst associated lower circuit of Jan 2008.

Coming back to 2010, this year, if the trend continues, is a bear/retracement phase. So far Nifty has retraced about 8.25% from the high of 5279 in early May this year. How far it will retrace is yet to be determined. But how soon it will recover and resume the bull-run is anybody's guess !!!

Trade well, trade safe !!!!!





Disclaimer: The said technical analysis is a perception based on various charting methods. Trades on my opinion are to be done solely at your own discretion.