Nifty Rally: An Elliot perspective of it

 The market has rallied from the bottom made on March 30th. After a corrective pause in the month of May and early June, it has again rallied. In terms of wave counts, let us see where we are.

1. The bottom of 22282 was made on March 30th. The rally from this point extended to a high of 24601 on April 21st. 

2. The markets spent the next 47 days in a corrective phase which ended with a low of 23070 on June 8th.

3. The markets corrected around 66 pc. 

4. If we take 22282-24601 as wave 1 then, 

                     24601-23070 as wave 2, then the wave 3 has commenced.

5. Wave 3s are a minimum of 1.618 of wave 1. So if our count is right then the next target for the nifty within the next 2 months will be 26821.

6. The region between 26400 and 26800 is an interesting areas since there has been multiple market tops in this region between September 2024 and Jan 2026. This will lead everybody guessing if it is the final top or the markets can go higher.

      

USD INR and Nifty co relation

 The USD/INR exchange rate and the Nifty 50 generally share an inverse relationship in the short term, but are largely uncorrelated in the long term. When the USD strengthens against the INR (the exchange rate goes up), the Nifty tends to fall, and vice versa.

In the short term, this relationship is primarily driven by Foreign Institutional Investors (FIIs)

Capital Flight: When foreign investors pull money out of Indian equities, they sell Nifty stocks and convert their rupees back to dollars. This heavy selling drops the Nifty and simultaneously increases the demand for USD, causing the USD/INR rate to rise

Capital Influx: Conversely, when global liquidity is high and FIIs pour funds into Indian markets, they buy rupees to invest in Nifty stocks. This pushes the Nifty up and the USD/INR rate down.

Long-Term Decoupling

Over longer horizons (e.g., 5+ years), the two usually diverge: 

• Structural Fundamentals: Over time, the Nifty is driven by the earnings growth and economic fundamentals of its underlying companies.
• Currency Depreciation: The Indian Rupee naturally experiences gradual depreciation against the USD to account for inflation differentials. However, this gradual weakening is often beneficial for Nifty heavyweights with global exposure (like IT and Pharma) because it boosts their export revenues.

Diverging Trends

Occasionally, the traditional inverse correlation breaks down. For example, during certain periods of global commodity shocks (like rising crude oil prices), a weak rupee can drag down the broader Nifty despite heavy corporate earnings growth, temporarily altering standard correlations

Why this is important?

The Government has removed the capital gains tax for foreign money on G Secs. This is expected to bring an influx of dollars and a stronger rupee. 

A strengthening rupee often leads to a stock market rally. Hence watch the rupee.