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“If trouble comes when you least expect it, then maybe the thing to do is to always expect it.” Cormac McCarthyConsidered in a proper historical and comparative perspective, the 30-share Sensex, which breached the 25,000 mark in May 2014 and the 50,000 mark on January 21, 2021, smashed the psychological 75,000 barrier, zooming to 75,124 (intra-day lifetime high levels) on April 9, 2024 on gains in FMCG, energy and metal shares. While markets dipped subsequently, closing 0.08% down following profit booking in index major Reliance Industries, the surge of almost 25% over the past year has been remarkable. On April 9, 2024, the combined market capitalisation of the BSE listed firms surpassed ₹400 lakh crore with the BSE Midcap index soaring almost 67% and the Smallcap index rising 65% over the past year. The NSE companies with maximum gains were Infosys Ltd, Apollo Hospitals, LTIMindtree Ltd, Tech Mahindra Ltd, Adani Ports and Special Economic Zone.The market was also buoyed by strong US economic data, oil price dipping from a five-month high to $ 85/barrel, easing policy rates by central banks in developed countries, easing monetary policy in India with softening food prices and positive Asian market. Investing in mid-cap companies, which are ranked 101 to 250 within Nifty 500 index, seemingly reduces selection bias because of growth potential, diversified portfolio across key industries and low cost. Further, the share price spikes driving the market boom transcends the 30 stocks. Since 2014, domestic institutions have invested nearly 40 % more than foreign institutions in Indian markets. Sensex surged 700 points on April 29, 2024 while Nifty50 climbed 150 points to over 22,550 and India VIX rose 12% to 12.25. Top five index contributors were ICICI Bank, SBI, HDFC Bank and Kotak Bank. Nifty Bank index hit its highest intraday point of 48,979.10. The surge stemmed from banking stocks momentum; rise in Nasdaq Composite to 15,927.90 (up 316.14 points/2.03%) while S&P 500 rose to 5,099.96 (up 51.54 points/1.02%); Japan’s Nikkei 225, Hong Kong’s Hang Seng index and China’s Shanghai Composite gained between 0.81% and 0.65%. Crude oil prices were low amidst reduced geo-political tensions after the capped Israel-Iran attacks and reassuring Cairo’s peace talks.Interestingly, Sensex has not slipped below the 70,000 mark since it breached its first on December 14, 2023. Evidently, this is not a case of straws in the wind and the brightening outlook is part of a pattern-a pattern that is at once both clear and inexorable, a pattern of swift rise, breadth, and surging investors. The New Normal-Critical Enablers of ‘India’s Decade’Why do we make such an ostensibly outlandish claim? Let us examine the big picture, connect the dots and draw meaningful inferences. The Indian process of economic growth and structural transformation has been marked by 7% growth in FY 24 juxtaposed against the global growth of 3% worsened by rising global indebtedness and cost of living crisis and robust earnings expectations in Q 4 of FY 24, particularly banks and auto manufacturers.The overarching macroeconomic setting is characterised by softening CPI inflation from 5.7% in December 2023 to 5.1% during January and February 2024 as against real GDP growth at 7.6% for FY 24 and real GDP growth for FY 25 is seen at 7% because of manufacturing growth and rising services exports (10% of GDP).According to ‘Recap 2024. Crystal Gaze 2025’ by Pantomath Group, India’s fifth-largest global market cap ($4.5 trillion) is likely to hit $10 trillion by 2030. The US ($44.7 trillion), China ($9.8 trillion), Japan ($6 trillion) and Hong Kong ($4.8 trillion) have greater market cap than India. India could be the third-largest economy by 2027, and the market cap will reach $10 trillion by 2030.Going forward, India will consolidate its position through important transformative triggers and drivers. The demand side is boosted by consumer boom, ascendant middle class and green transition. Demographic dividend, corporate sector’s return on equity exceeding the global average, greater access to finance, the coming to age of the financial sector and streamlining of physical infrastructure (national road network grew by 60% over ten years, twice the previous decadal rate) and digital infrastructure, digital transfer-payments, modern capital markets and banks, and a unified digital tax system drive the supply side. The IMF has revealed that “digitalization-driven productivity gains” (e.g., monthly use of payment system by 300 million) in India have acted as a force-multiplier; a trend reinforced by macroeconomic growth, robust democratic and business frameworks, demographic dividend, sustained policy reforms, rising global significance, “military-industrial complex”, space technology, logistics, fintech and AI. Look how far we’ve come!Heightened external uncertainty was exacerbated by global tensions, including Israel, Iran, Palestine, Ukraine, Russia, etc., and volatile crude oil prices. But as Ms. Gita Gopinath, the IMF’s first DMD stressed “the disruptive effects of these swings on emerging market economies are much more muted than in earlier episodes… because emerging and developing countries have developed much stronger macro policy frameworks to be able to deal with shocks”. Viewed thereof, the Indian economy is truly on a sustained 7 % growth course. And, since the capital market is a microcosm of the broader Indian economy, the capital market could maintain its steady upward climb and a secular bull run could be in the offing. Going forward, 75 basis points policy rate cuts may occur in a gradual and calibrated manner in FY 25 because of downward trending inflation trajectory and the trade-off between growth and inflation. Dotting the i’s and Crossing the t’s of Money Sloshing Around - Discerning a Pattern “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful”. Warren BuffettIt has often been debated whether this stratospheric level is a flash in the pan or is an integral part of a higher onward march of the capital market. Retail investors of India have been consistently investing in Mutual Funds through the SIP route with an average monthly investment of ₹20,000 crore, i.e., an annual investment of ₹2.50 lakh crore. There are 80 million unique investors investing money in the Indian stock markets through NSE. These 80 million investors constitute 50 million unique households, which is 17 % (about 5 % about two decades ago, nearly 60% share in the US) of India’s all households cumulatively.Follow the money, honey!This steadily rising proportion (increment of over 12 crore demat accounts in a decade) has been facilitated by burgeoning middle class, higher penetration level of mobile phones, growing popularity of trading apps, soaring capital market and a pandemic-driven digital thrust. The growth saga is succinctly captured in the seven-fold rise in individual demat accounts from 2 crore accounts in April 2015 to nearly 15 crore in February 2024. This kind of transformed equity asset class, shifting paradigms, data analytics and user experience with technology has created a silent revolution in the country. Most financial transactions, financial investments and holding of financial investments are done digitally relegating the customary banking/investing system to a miniscule level, thereby enhancing efficiency and efficiency and slashing time and cost reminiscent of William Wordsworth’s words, “Bliss was it in that dawn to be alive, But to be young was very heaven!”This is the way to go because as Robert G. Allen pithily asked “how many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case”.Granular Examination across Asset Classes- the Dance of Markets“Equilibrium is inseparable from motion and all equilibrium is relative and temporary” Friedrich EngelsWhile there are several reasons for this surge, peaks and troughs, booms and busts are an integral part of the stock market saga - much like the waves of the sea, which incessantly rise and fall. Hence, there could be an element of “irrational exuberance”, “froth” and “bubble”. Of the three asset classes - equity, debt and gold, equity is undoubtedly becoming an increasingly important asset class. Accordingly, undivided attention on long-term growth through asset allocation, focusing on time horizon, asset allocation being a function of the individual’s return-volatility appetite, quality assets, and time in market over timing, i.e., staying invested rather than obsessively concerned with catching the top and bottom of the peak and the trough is required. Asset allocation strategies, however, work better at equity market highs.Equity retail participation rose strikingly as the number of mutual fund folios grew from less than 3 crore in March 2014 to over 11 crore in Dec 2023. Retail investors, including high networth individuals, account for 91% of the Indian fund industry’s nearly ₹ 22-lakh -crore equity assets under management (AUM) surging at 30% CAGR over the past decade. Further, monthly SIPs surged from a modest ₹1,200 crore in 2014 to over ₹ 19,000 crore in 2024. Domestically Driven RallyWith concerns about Mauritius Tax Treaty, US Bond Yield surge and the geopolitical tensions, there were net outflows of ₹6,300 crore till April 26. Cumulatively, the net FPI investments into Indian equities in 2024 stood at ₹4,589 crore. FPIs were net debt sellers also with outflows of ₹10,640 crore till April 26. However, despite the April selling, FPIs total net investments into debt were positive at ₹45,218 crore till April 26, 2024. All FPI equity selling has been absorbed by domestic institutional investors (DIIs), HNIs (High high-networth individuals) and retail investors.Jungle out There-Disruptive Times Need Innovative StrategiesMoving goalposts and shifting perspectives in this VUCA world are characterized by remarkable technological transformations and heightened business complexities; explosion of Internet-fuelled information; technological automation and progressive globalization. The SIP-driven rise of individual investors has provided mutual fund companies the potential and the heft to successfully withstand foreign fund selloffs. This welcome financialisation of savings, progressively increasing digitisation in a manner, which is unprecedented in India and unparalleled in other geographies and ease of doing investment with mobile platforms and UPI has provided tailwinds to the vibrant Indian market. This rapidly emerging investing culture is a game-changing development that is here to stay and transform the financial markets.Gary Hamel stressed, “we stand on the threshold of a new age - the age of revolution.... For the first time in history we can work backward from our imagination rather than forward from our past”. This thought of transcending the traditional confines of linear thinking continues to resonate today. RBI’s Prism According to a working paper on ‘Equity Markets and Monetary Policy Surprises’ by Mayank Gupta, et al, DEPR, RBI from January 2014 to July 2022, “...equity markets are affected more by the changes in the market’s expectations of future monetary policy (path factor) than the policy rate surprise (target factor) which is in agreement with the conventional thinking that equity markets are forward-looking”. The equity volatility on the policy day “is affected by both target and path factors, as markets digest the policy announcements and traders adjust their portfolios throughout the day”.The target factor captures the surprise component in central bank policy rate action, while the path factor captures the impact of central bank’s communication on market expectations regarding the future path of monetary policy. While the short duration windows aim to control other potential drivers of equity prices, the monetary policy announcements are accompanied by regulatory and developmental measures which can also impact markets. The sparse occasional trading in the OIS markets and other domestic and global developments during the narrow window can also impact the analysis. Key Insights and Future Perspectives- a Tale of Two HalvesDespite 8.66% (Feb. 2024) consumer food price index, the probability of healthy output and declining food inflation make us sanguine on the rate cutting front. However, all is not hunky-dory - not by a long shot. With a price-to-earnings (P/E) ratio of 25.54- above the average of 18.61 between 2003-04 and 2007-08 and 23.81 between 2014-15 and 2023-24, there are persisting valuation concerns. There are also issues of corporate profits, earnings growth, continued inflow of funds into equity MFs and broad-based consumption. But the capital market does not progress linearly and progressively unidirectional manner. Despite the choppy data and negative shocks, the stock market direction over the long haul is unequivocally clear and positive. This virtuous cycle a la Don Bradman (though even he failed sometimes) lead to a “buy India, sell China” strategy. Enduring compounding could zoom Sensex to 1,50,000 by 2029-“the best is yet to be” (Robert Browning). But as Ben Graham said “the individual investor should act consistently as an investor and not as a speculator”. Similarly Nobel Laureate Paul Samuelson stressed the quality of patience, when he averred “investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”.Sane and sage words, these! The holy grail of investing!(The author Dr. Manoranjan Sharma is Chief Economist, Infomerics Ratings. Views are own)

Oil prices dropped to a near two-month low on receding tensions in the Middle East, a complex interplay of escalating supply levels, demand worries, and challenging economic indicators. The global benchmark, US WTI crude currently clinging below $80 a barrel, has lost more than 10% from a near two-year high tested last month. A similar correction was witnessed in the Asian Brent and the domestic MCX futures as well.There were worries that the ongoing Israel-Hamas war would spread across the Middle East after Iran attacked Israel in the second week of April. This sparked a rise in the global oil prices in hopes that it could adversely hit the critical maritime routes and affect the global oil supply chain. However, attempts by various countries to cool down the tensions put downward pressure on global oil prices now. In April 2024, global leaders, including the US and Europe urged Israel to show restraint in response to rising tensions in the Middle East. Egypt has taken the initiative to restart peace talks between both countries and the US urging Hamas to accept Israel’s ceasefire for hostage offer. Bearish sentiment is building up in oil markets on worries that supply will outstrip demand. The recent US data reported a surprise rise in crude oil inventories. A surge in supply coupled with a noteworthy increase in US production suggests an oversupply in the market. The US Fed’s decision to retain high interest rates points to ongoing concerns about inflation and economic instability is also influencing market sentiments. Higher rates would strengthen the US dollar, making oil more expensive for holders of other currencies which may potentially reduce the demand. In addition, a high-interest rate environment affects consumer spending and business investment, further dampening the demand. A rise in US crude inventories indicates declining demand from the world’s largest oil consumer. As per IEA data, global demand growth is currently in a slowdown and is expected to ease to 1.2 million barrels a day this year. Production policies of OPEC countries also influenced the prices. In response to the oversupply and faltering demand, the OPEC+ countries have reduced production by 2.2 million barrels per day into the second quarter or mid-2024. However, the OPEC+ recently signalled the possibility of extending its output cuts. This initiative is aimed at stabilizing or increasing oil prices by limiting the available supply. There are also reports of that the US government potentially buying oil to replenish strategic reserves if prices drop below $79. Such actions could support the prices by enhancing demand for surplus stocks. The ongoing supply-demand dynamics are not promising for the oil prices. The possibility of supplies beating demand is likely to dampen the prospect of oil. Looking ahead, traders would cautiously track the ongoing geopolitical crisis, global growth outlook, the performance of the US dollar, and the Fed’s rate cut decisions to set a direction for oil prices. On the price side, firm support for NYMEX crude is seen at $74 a barrel, breaking of which could weaken the sentiments further. At the same time, consistent trades above $82 could possibly lift prices higher but are unlikely to break the recent highs. In the domestic market, MCX June futures have support at Rs 5800 and resistance at Rs 7200. (Hareesh V is Head of Commodities, Geojit Financial Services)

Fundamental and technical analysis are the two widely acknowledged ways of stock investing. Investors belong to either of these two schools of thoughts.While fundamental analysis focuses on a company’s business operations and financial health, technical analysis focuses on price patterns and trends on a stock’s price chart.Within these two methods of analysis, numerous theories exist regarding how investors approach stock investing. No matter how you approach stock-picking, the end goal for all investors remains the same, i.e. to create wealth.Today, let’s study one of the famous theories in technical analysis: Elliott Wave Theory.This theory uses wave patterns to help investors understand market trends.What is Elliott Wave Theory?The Elliott Wave theory is focused on identifying a trend in financial market values and is based on the assumption that market patterns that have prevailed in the past might extrapolate in the future. This theory was developed by Ralph Nelson Elliott in 1930. The theory still finds relevance among traders/investors and financial institutions.The theory proposes that market price movements follow a repetitive pattern of waves, both upwards and downwards, driven by investor behaviour and sentiment. According to the theory, these distinct patterns formed by the waves can be a useful tool to understand movements in stock prices.As per this theory, market cycles are made up of five wave patterns that provide direction to the primary trend (impulse waves), followed by three wave patterns against the main trend. These waves are fractal, meaning they occur in multiple time frames, from minutes to months or even years.This theory uses various supplementing tools and techniques, such as Fibonacci ratios, trend lines, and momentum indicators. However, it is subjective and can be differently interpreted by various analysts, and not all investors agree on its validity and effectiveness.What is the basic structure of the Elliott Wave Theory?The structure of Elliott Wave Theory includes:Impulse Waves (5 waves): These are five waves that move in the direction of the primary trend and are labelled as, 1,2,3,4, and 5. Amongst these, waves that move in the direction of the main trend are 1, 3, and 5. Waves 2 and 4 are correcting waves against the trend.Corrective Waves (3 waves): These waves move against the main trend and are labelled A, B, and C. These waves typically retrace a portion of the preceding impulse waves.What are the Rules of the Elliott Wave Theory?The rules of this theory are as follows:Wave counting:The identification and counting of waves is the foundation of this theory. A complete cycle consists of eight waves, five impulsive and three corrective waves. These waves form larger degrees of waves within waves, creating a fractal-like pattern.Wave proportions:The theory suggests that waves within the same degree exhibit proportional relationships. For instance, the strongest and longest wave in the impulsive sequence is wave 3, which typically extends beyond the price territory reached by wave 1. Also, wave 2 retraces under the range of 100 percent of wave 1, and wave 4 retraces to a lesser degree than wave 2.Wave relationships:Waves exhibit specific relationships with one another. For example, wave 3 is never the shortest among waves 1, 3, and 5 within an impulsive sequence. Moreover, wave 4 usually does not overlap with the price territory covered by wave 1, ensuring that the impulsive structure remains intact.Wave alternation:The Elliott Wave Theory emphasises the concept of alternation between waves of similar degrees. This means that if wave 2 is a sharp and swift correction, wave 4 is likely to be more complex and time-consuming. Similarly, if wave A is a simple correction, wave B is likely to be more complex or vice versa.Wave extension:In certain cases, one of the impulsive waves within a sequence may extend significantly beyond its expected length. This phenomenon, known as wave extension, often occurs in strong trending markets where one of the impulsive waves experiences rapid price expansion.Wave failure:While the Elliott Wave Theory provides guidelines for wave patterns, it also acknowledges the possibility of wave failure. Wave failure occurs when a wave violates one of the fundamental rules, such as Wave 4 overlapping with Wave 1 or Wave 2 retracing more than 100 per cent of Wave 1. In such cases, the wave count may need to be reassessed.Fibonacci ratios:Although not a strict rule, Fibonacci ratios often play a significant role in Elliott Wave analysis. These ratios, such as 0.618 (golden ratio) and its derivatives, frequently appear in the relationships between wave lengths and retracements, adding another layer of confluence to wave analysis.Investors must practice and implement adequate risk management tools like setting up a stop-loss order to minimise losses if the trade does not pan out as expected.Another aspect which needs to be taken care of is positing sizing. Investors must size their bets based on their faith in the theory and the overall risk-reward ratio of the trade. As the markets continuously evolve, investors must monitor the price movements and adjust their trading strategies accordingly.Note: The article is for information purposes only. This is not an investment advice.(The author is Vice President of Research, TejiMandi)(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

A strong earnings season and blockbuster reports from tech industry titans fueled a U.S. stock market rebound from the first real swoon of 2024. Next week's inflation data could determine whether the good vibes continue. The benchmark S&P 500 index is up over 9% for the year, up near its late-March record high, following a 5% pullback that occurred last month. The bounce has overlapped with a stronger-than-expected first-quarter reporting season for U.S. companies. With well over 80% of the S&P 500 having reported results, companies are on track to have increased earnings by 7.8%, well ahead of the April expectation of 5.1% growth, according to LSEG IBES. Still, some investors worry the rally could stall without evidence that inflation is cooling again. While Fed Chairman Jerome Powell has reassured markets the central bank is unlikely to raise rates anytime soon, months of strong inflation have led to concerns that policymakers will not cut them this year. Strong earnings have "got investors feeling more comfortable about being in this market," said Art Hogan, chief market strategist at B Riley Wealth. However, "the trajectory of inflation is always going to be important to us while we're in a cycle where we expect the next thing for the Fed to do is to cut rates." Inflation reports have preceded market pivots in recent years, as the Fed has ramped up interest rates to cool consumer inflation from four-decade highs hit in 2022. Most recently, an April 10 release showing a third-straight month of stronger-than-expected inflation was followed by a roughly two-week decline in stocks as it spurred fears the Fed could raise rates this year. Economists polled by Reuters expect the May 15 consumer price index report will show an increase of 0.3% in April from the previous month. Investors are also awaiting data on retail sales next week, as well as earnings from Walmart, Home Depot and Cisco. "If the CPI report comes in hotter, it's going to likely price out any rate cuts for 2024," said Matthew Miskin, co-chief investment strategist with John Hancock Investment Management. "You may actually have to start talking about policy that's more restrictive if (inflation) is too hot relative to expectations." BOOST FROM EARNINGS For now, bullish investors have gained confidence from a solid earnings season. Standouts included generally strong reports from most of the so-called Magnificent Seven tech and growth giants whose shares helped propel the market higher last year and continue to have a huge weighting in the S&P 500. Among these, Alphabet announced its first dividend as the Google parent topped estimates for sales and profit, while Apple's revenue fell less than feared as the iPhone maker unveiled a $110 billion stock buyback plan, the largest ever such authorization from a U.S. company. "There's been enough in terms of upside surprise that's helped to support the markets," said Yung-Yu Ma, chief investment officer at BMO Wealth Management. "There was concern that it could even be somewhere between a modest and weak earnings season, which didn't happen." With Nvidia the last of the group to report, on May 22, Magnificent Seven quarterly earnings are on track to jump 49.4%, according to Tajinder Dhillon, senior research analyst at LSEG. Analysts are also becoming more upbeat about megacap financial prospects. Estimates for 2024 earnings for the six megacap companies that have reported have risen by 2.1% on average over the past 30 days, versus only a 0.1% rise in 2024 earnings estimates for the S&P 500 overall, according to Jessica Rabe, co-founder of DataTrek Research. Still, investors have punished companies whose results missed expectations. These shares have underperformed the market by 3.2% this quarter, compared to 1.2% the previous quarter, according to a report from Manish Kabra, chief U.S. equity strategist at Societe Generale. That reaction is "not a major surprise, as this season overlapped with bond market volatility and a strong performance in the run up to reporting," Kabra said.

Billionaire investor James Simons, the mathematician and Cold War code-breaker who founded one of the world's most prominent and profitable hedge funds, Renaissance Technologies, has died at 86, his foundation said on Friday. The Simons Foundation did not give a cause of death. Sixty years ago Simons -- who preferred to be known as Jim -- shifted course from teaching mathematics and working in U.S. intelligence to investing. His pioneering use of computer signals for trading decisions earned him the nickname "Quant King." With a net worth estimated at $31 billion by Forbes, Simons also became a prominent philanthropist, giving away billions of dollars during his lifetime to support medical and science research, teaching and Democratic candidates. "Churchill said 'great and good are seldom the same man.' Jim Simons was the exception that proves Churchill's rule," said Clifford Asness, managing and founding principal of AQR Capital Management, referring to British war-time Prime Minister Winston Churchill. As a mathematician, Simons was used to working large sets of data and comfortable finding patterns to guide buying and selling. He founded Renaissance in 1978 in East Setauket, New York, 70 miles east of Wall Street. He quickly forged a new way to invest, laying the foundations of quantitative trading that has been embraced by dozens of firms in recent years. "We hire physicists, mathematicians, astronomers and computer scientists and they typically know nothing about finance," Simons, told a 2007 New York conference. "We haven't hired out of Wall Street at all," he added. On Wall Street Simons was revered, as well as a little feared. Renaissance, whose Medallion Fund delivered average annual returns of more than 60% over three decades, became one of the world's most successful hedge funds under Simons. He retired as chief executive officer in 2010 and stepped down as chairman in 2021. Simons was secretive about how his firm made money. He was described as someone who viewed the markets as a code to be cracked, Wall Street Journal writer Gregory Zuckerman wrote in his 2019 book "The Man Who Solved the Market." The Medallion trading system relied on buying and selling that works in concert to generate high returns at low risk across asset classes, in such a way that patterns normally remain hidden to other traders. In 1994, Simons and his wife, Marilyn, established the Simons Foundation, which supports scientists and organizations worldwide in advancing the frontiers of research in mathematics and the basic sciences. He is survived by his wife, three children, five grandchildren, and a great-grandchild. "I did a lot of math. I made a lot of money, and I gave almost all of it away," Simons told a 2022 event honoring Abel Prize winners who have been singled out for their mathematical achievements. "That's the story of my life."