Technical analyst Anant Acharya said that, historically, the market has bottomed out in the third year of every decade. (Illustration: Suneesh Kalarickal)
Stock markets have been holding steady in spite of all the negative news investors have been beset with, and didn’t move too much even after Budget 2023.
According to Anant Acharya, a market veteran well-regarded for his expertise in trend-reversal patterns, the charts are signalling the end of an extended bull market. The correction is unlikely to extend beyond the end of this year. Edited excerpts from an interview:
What is the level you are seeing Nifty heading to?
Since Nifty has taken support at the Budget Day bottom (of 17,353), I am expecting the index to head to 19,100 between March 10 and 20.
After that?
That is the biggest question right now. If it doesn’t break down below the Budget Day bottom and heads to 19,100-19,200, then it will form a pattern called an ending diagonal. Ending diagonals appear after an extended bull market, which is what we have had since 2020. So, if this comes to be, then it would signal the end of a bull market for the time being.
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How far could it fall from there?
My first target would be 14,100 and, if that is also broken, it can go as low as 10,800. But I would put all my money on 14,100.
If it heads in that direction, when will this level be reached?
14,100 by September or November of this year (2023). After that, we are looking at a four-year bull run.
If you look at historical data (100 years if you take the Dow Jones Industrial Average data), every third year in a decade is the beginning of a bull market. This is based on time cycles. If you just look at all the previous decades, 1983, 1993 or 2003 or 2013, you will see that the market finds a bottom in the third year (of a decade) and then shoots up. This (upward) trend then holds till the seventh year of the decade. I am expecting the market to go up from 2023 to 2027.
Between 2003 and 2008, the Nifty went all the way from 1,000 to 6,500. (Between 2013 and 2017, it went from 6,000 to 10,000 levels) Will it happen this time? It could.
If it breaks the Budget Day bottom, then where would it head to?
It is a very unlikely scenario. If Nifty had to go down quickly, it would have done so from the 17,300 levels itself. Plus, there is a consensus of the market being weak right now. Like we spoke about earlier (in a November 18, 2022 interview) whenever there is a consensus of the market being weak, the market normally does the opposite action, which is a rally.
This happens because when there is a consensus that the market is weak, then every person who wanted to sell has already sold and is waiting for the prices to come down further to square off (do the opposite trade) his position. For the market to go down further, you need additional selling to come in. (But) going by the exchange data on FIIs’ (foreign institutional investors’) holdings and of the open interest, we can see that they have already built up their short positions. They are waiting for the market to go down further to buy but there are no more sellers coming in to sell at lower prices, which is why Nifty is holding stubbornly to its 17,600-17,800 levels. Therefore, (when there is no one ready to sell at the bid price, then someone will buy at the ask price) the indices will start to go up and once Nifty takes out the Budget Day high of 17,979 or 18,000 (this interview was on February 14 and Nifty took out 18,000 on February 15), which will be the stop-loss for many short sellers, the short sellers will run to cover their positions and this will take Nifty swiftly higher to 19,100.
The rally to 19,100 is likely to be the last rally in the entire bull market (starting from 2020) and, the last rally, the breadth of the market will reduce. The action will be limited to 10 to 12 scrips that are heavyweights on the index… it could be Reliance, the HDFC twins or ITC, which could take the index up by the last 1,000 points.
How will the broader markets react?
CNX 500 (Nifty 500) also shows a similar pattern. It will go up 10% up from here near 16,100 levels and then 11,900-12,900 will be the first target. CNX IT is stuck in the 31,000 levels like we had spoken last time. It won’t go up and will move between 26,000 and 31,000 levels. When it falls, it will fall to 20,000, along with the Nifty.
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So even if CNX IT falls to 20,000, it will happen by the end of the year and then it will rally?
Yes.
Bank Nifty too shows the same pattern as Nifty. It will hit a high of 46,500 by end of March and then correct to 30,000 by the end of the year.
We should watch at 15,200 on Nifty and 32,800-33,000 on Bank Nifty. On Bank Nifty, between 30,000 and 33,000, the buying should emerge.
So, broadly the indices will rally by 10 percent till mid- or end of March and then correct by 20-25 percent till the end of this year?
Yes, broadly… Pharma is another story. It is making a different pattern. It won’t do much here, it will waste time (moving sideways) and then it is likely to go down to maybe 10,900-11,000 levels, not more than that.
