Market patterns suggest that 2019 could turn out to be a mirror image of 2009

Deep cuts were witnessed in Sept-Oct 2008, a sideways dull market from Oct 2008 to March 2009 followed by consolidation in the pre-election rally. The same scenario has been repeated in 2018-19 till now

History repeats itself and so do chart patterns. It can be observed looking at the Nifty 50 daily chart that the current scenario might turn out to be the mirror image of 2009. UPA emerged victorious in 2009 general election and Indian stock market celebrated the event with two upper freeze in a single day followed by the bull-run that continued for the next 18 months. But, the market went through the tough phase before experiencing such euphoria.

Deep cuts have been witnessed in September-October 2008, followed by sideways dull market from October 2008 to March 2009 and eventually, the consolidation resulted in a pre-election rally.

The same scenario has been repeated in 2018-19 till now, which suggests that this rally could get accelerated in May series with a sharp move and the ruling party might remain in power once again.

Pattern comparison in 2009 and 2019

In the current situation, we cannot ignore the importance of “Time Cycle” as chart study has come under two parts: the first is “Price Factor” and another one is “Time Factor”, which is often ignored.

As per the Time Cycle, later half of the May and October has its own significance and many times major move has taken place during this period in either direction. These moves show the importance of time cycle:

MAY

17 May 2004: One of the major fall in the history of the stock market. Nifty crashed more than 19 percent in 2 days (unexpected defeat of NDA).

18-20 May 2006: One of the biggest fall in history. Nifty registered the loss of 20 percent in three days.

18 May 2009: The market witnessed 2 upper circuits in a single day.

24 May 2016 to 30 May 2016: Nifty witnessed an upmove of more than 480 points

15 May 2018 to 23 May 2018: Nifty fell more than 500 points

OCTOBER

27 Oct 2008: Indian market registered a lowest low of 2008 bear market.

27 Oct 2009- 3 Nov (1 st trading session of month): Nifty fell by 8.5 percent in 5 days from (4970 to 4538).

29 Oct 2010 – 5 Nov 2010: Market rallied more than 6.5 percent and given 4 gap in 6 trading sessions (from 5937.1- 6338.5).

28 Oct 2011: Nifty opened gap up and made short term top. And fell by more than 14 percent in 1 month.

26 Oct 2015: Nifty registered short term top of 8336.3 and fell more than 6 percent in next 10 trading sessions.

28 Oct 1929: The biggest depression ever in the history of the global market but the lowest low of 1929 fall was registered on this date. The deadliest black Tuesday ever.

If we put the things into perspective and include the chart pattern and time cycle into the study, then it would not be an exaggeration to say that May series could turn out to be a replica of 2009.

Looking at the expected volatility, we believe that the FMCG sector is offering decent risk-reward opportunity and our top bets would be Dabur, Colgate Palmolive, Godrej Industries, Marico and HUL.

Disclosure: Rudra or its research analysts, or his/her relative or associate do not have any direct or indirect financial interest (except L&T Finance Holdings Ltd.) nor any other material conflict of interest at the time of stock recommendation, in the subject company. Also, Rudra or its research analysts, or his/her relative or associates does not have actual/beneficial ownership of one percent or more securities of the subject company.