Update on Elliot Wave Analysis

 In the analysis done in July, we had studied the Elliot progress.

https://money-manthan.blogspot.com/2026/06/nifty-rally-elliot-perspective-of-it.html

To summarize this progress:

1. Wave 1 was 22282 to 24601

2. Wave 2 was 24601 to 23070

3. Wave 3 started at 23070.

Wave 3.1 23070 to 24531

Wave 3.2 24531 to 23606

Wave 3.3 should be 25970.

So, the next interim targets should be 25800 to 26000.

Wave 3.3.1 would be ongoing currently. If this analysis is correct then the month of August would be range bound between 24000 and 25000 as the first 2 waves of wave 3 are ongoing.

Triggers for a new High in the markets

 The Indian markets hit a low towards the end of March 2026 and since then have risen. Let us examine the factors which could lead to the markets hitting new highs in this year from a fundamental point of view.

1. Easing Crude Oil prices

    Ever since the war ended, the crude prices have moderated to reasonable levels. This eases the pressure on the Indian economy for the time being. We are in a multi year commodity bull market but stable crude oil prices can help propel the markets higher.

2. India US Trade Agreement finalization

    There are indications that the trade deal will be finalized and finally signed soon. That is a huge trigger for the markets. Long Term benefits remain to be seen but signing of the trade deal is a sentiment booster.

3. Unravelling of the AI Trade

    This is the most significant trigger for me. Liquidity has chased Korea and Taiwan and these markets have boomed. FIIs have taken money out of Indian markets. The FII ownership of Indian stocks has fallen to multi year lows. There are now noises of FIIs returning to India and July has been positive so far. This would be a major trigger for the markets to rise.

Low crude oil prices, progress on the Indo US trade deal front, FIIs returning and decent monsoons are the key triggers for a short rally in the markets towards new highs. 

Another point to note that the Nifty may be 10 pc down from all time highs but the mid cap and small cap indices are almost at ATH.

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.

Nifty - Perspective from Elliot Wave

The markets are currently moving aimlessly. There seems to be no clear cut direction right now. Let us look from the Elliot perspective. 

1. The markets made a significant low of 22182 on April 2nd. It rallied from there to 24602 on April 21st. From there in 1 month, it has come down to a low of 23262 on May 13th.

2. If we take 22182 - 24602 as wave 1, it covered about 2420 points. Corrective targets down would be 23670, 23392 and 23105.

3. Only 23105 remains pending. Below 22700 we are headed towards new lows and above 24118 we are headed towards new highs.

4. The area 24300-24600 was a massive support zone earlier and it will not clear that very easily.

In a nutshell, the markets have taken more time to correct but not yet breached the 61.8 pc of the up move. The 3rd wave when it starts would be a powerful up move taking us to new highs.

Commodities - The ongoing boom and the next opportunity

 Commodities have entered into a secular bull run. With the help of a few charts, I will demonstrate how in the last 10 years commodities have gone multiple times.

It started with precious metals like Gold and Silver.

 

Then it extended to crude oil and metals like copper. Charts are shown below:

Now, the boom is spreading to agri commodities like rubber, cotton and so on. You can track these prices here:

https://tradingeconomics.com/commodities

The whole objective of this exercise is to identify stocks from these sectors and bet on them to make a killing from multi baggers.

What do the Elliot waves say?

Last week, we focused on RSI as a Buy or Sell signal. This week, let us look at what the Elliot waves say.

Elliot helps in taking a longer term view of the markets.

The chart is of the entire up move started from Covid low bottom of 

Wave 1 7552 - 18604= 11052 points. This took approx 19 months)

Wave 2 18604- 15191= 3413 points (31 pc correction) approx 8 months

Wave 3 15191 and ongoing since July 2022.

Wave 3 targets could be 26243, 29249 or 31760

Elliot does not put too much focus on the time lines but on price.

Implications for the longer term:

Once Wave 3 gets over at approx 29k then entire up move from 15k to 29 k will corrected. This can easily take 12 to 18 months. Post this 1 more rally of 10 12 K points and then a multi year correction.

Let us re visit this hypothesis end of May when the wave 3 will be closer to maturity.

The importance of RSI as a Buy Sell Signal

 The markets give us multiple opportunities to buy and sell. How do we know when to buy and when to sell? Let us explore that.

There is a simple technical indicator available called RSI. Readings over 70 means markets or stocks are overbought and readings below 30 are an indication of markets or stocks being oversold and a time to buy.

Let us look at a couple of charts of Nifty on daily and weekly basis to illustrate this.

On the daily timeframe in the last 3 years, there have been at least 5 sell opportunities and 3 buy opportunities.

Let us look at the weekly chart below:

 

Here also, in last 10 years, at least 4 Sell and 3 buy opportunities have come. In Weekly RSI, these are opportunities for a bigger rally and the current opportunity is a similar one.

You can explore further using the below link:

https://stockcharts.com/sc3/ui/?s=%24NIFTY

Bottomline:

RSI is a very simple and powerful technical indicator to identify Buy and Sell opportunities. This is independent of the fundamentals and purely on Technicals.

 

Target 25 K Nifty Achieved. Book Profits

 On May 15th 2024, when Nifty was around 22K, I had given a target of 25k. The target is achieved and now one can book profits.

I expect some kind of correction before the next leg up.

On Target for Nifty 25k

 Just a quick update on the January post. We are on track for Nifty 25k by H1.

1. If anyone wants to buy any stocks, now is a good time.

2. For the rest of the year I am very bullish on commodities especially precious metals.

Everything will go up for sometime followed by a big correction.

As Day follows Night and vice versa correction will follow the bull run. For now enjoy the ride!!!

Elliot counts revisited

 Revisiting the Elliot counts,

1st wave 16828–20222 3394 points

2nd  wave 20222 18838; 

3rd wave unfolding

3.1 18838 22124       3283 points   

3.2  23124 - 20875 or 20481

3.3 ???

3rd wave target can be 23k to 26k 

Then 4th wave to follow and 5th truncated if 3rd wave is extended.

So target for Nifty 26 to 28k in H1.

Strategy book profits from 25k onwards

May 23: Election Results played out as usual

 The Karnataka results are out and as expected the Congress has won the elections. I had predicted that the markets would do well till May and here we are a rally of about 1600 points on the Nifty. What lies next for the markets?

1. After the Karnataka elections now there will be people clamoring saying that the BJP is finished. 1 swallow does not make a summer. There would be elections at State level but Modi Government remains set for third term in 2024.

2. The monsoon forecasts do not look too good and that should cap a runaway rally in the markets. The monsoons have been good for at least the past 4 5 years and now right now a poor monsoon is on the cards.

3. The markets have rallied about 1600 points from the bottom in Jan Feb and are now within touching distance of previous highs. A correction is round the corner.

4. The recession has started in US and huge layoffs in IT companies in the US and in India are also muted pay hikes. The sentiment has been damaged. when the sentiment is damaged, people start spending less money. It is a self fulfilling prophecy.

5. We have come to the end of the rate hike cycle and that should bring relief to the home loan folks.

The markets should correct and that gives us a chance to reflect on what next to be done.

April 23: Markets should still rally

 The month of March has come and gone. The Markets were down by about 1.5 pc. This is the 4th month in a row markets have closed negative, Let us see what April has in store.

1. By law of probability, 5 red monthly candles have almost never happened. So April should be a positive month. The market has been oscillating around the 17000 mark.

2. The US Bank crisis should blow over. Inflation is rising and it is a localized issue. Interest Rates India should also rise by 25 basis points.

3. The Karnataka elections in May and results on May 13th will be a trend decider for the Indian markets. Till then the markets should rally.

4. In times of uncertainty, Gold always rises and Gold will do well.

5. The Indian markets have shown great resilience in times of global uncertainty so I expect them to do well and at least reach 18500 if not higher.

6. The Ukraine crisis will again come to a boil with Spring here and a fresh offensive being readied for a launch.

If I was an Indian investor, I would lock into high interest rates, focus on my short term debt portfolio, avoid equity markets and book profits in the existing portfolio.

March 23: Markets likely to rally

 The budget has come and gone. The Adani saga also seems to be settling down, What does the month of March hold for the Indian Equity Markets? Let us try and explore.

1. Last 3 months the markets have fallen and a relief bounce of 8 - 10 pc is on the cards. 18500 to 19000 is the range we can expect if the market rallies. If the markets do not correct in Jan to March period, then May we have a bigger crash.

2. The real election results will be the Karnataka ones in early May. I see it very difficult for BJP to win. The current infighting, an ineffective Chief Minister coupled with JDS and a strong Congress in Karnataka.

3. In 2004, the Lok Sabha results were a a similar trigger.

https://www.rediff.com/money/2005/jan/12market.htm

4.  The weather forecast is not too promising. Hot summers followed by a poor monsoon means we are heading towards a deficient monsoon. We are also entering a period of election results. Nov 2023 has 3 other states MP, Rajasthan, Chhattisgarh where again Chhattisgarh is a lost cause.

The Risk reward ratio becomes unfavorable above previous all time highs. At 16K it becomes favorable.

To summarize next 2-3 months, I am bullish but bearish in the longer term.

Let us evaluate in the first week of April which way we are headed.

Feb 23: Decoding the Budget and the Adani saga

 As promised, restarting the blog after a sabbatical. My goal will be to publish it on a monthly basis at least. Let me start off with trying to decode 2 of the hottest events currently namely the budget and the Adani saga.

First of the budget:

1. The budget is a non event in most years and this year the main talking point was the sops given in the New Tax regime. Leaving the numbers aside, let us look at the big picture. The rightly stated goal of the Government is to do away with complex tax exemptions and simplify the tax process. For example till a few years ago we were submitting medical bills of Rs 15000 to get the exemption till the Government gave it to everybody scrapping the cumbersome process.

Similarly it will be better to scrap the home loan exemptions and straightaway give the benefit to everyone who buys an affordable home. When I as a middle class person bought an affordable home in 2015, I was pleasantly surprised to be given a tax refund of 2 lakhs at the time of possession by the Tatas in 2020 because the Government gave them the benefit.

The Old Regime will be sunset in a few years and only the new Regime should exist.

2. The second point which everyone missed was increasing the Senior Citizen Scheme limit to Rs 30 lakhs from 15 lakhs. While this is laudable, the rates of 8.1 pc are too low. The original rate of 9.3 % was correct. It is too much to expect people in the evening of their life to gamble in the markets. This anomaly needs to be addressed.

Rest all are policy issues and have almost no bearing on our day to day life just good entertainment.

Next is coming to the Adani saga:

1. It is purely a commercial short selling attack as very common in the US. As per the pro and anti Adani camps various stories are being embellished. Remove the outer layers and few things stand out.

a. The stock prices in PE terms are overpriced at 200 and 300 PE

b. Adani groups how solid assets like airports, ports, power distribution which have solid moats around them. So, the in the years ahead, the PE multiples will shrink as the profits catch up.

c. Such projects have long gestation periods and when they start spewing out cash, they become cash cows.

d. The correct PE to buy is 20 to 30 multiples for the kinds of businesses Adani is in.

It is best to cast away the hype and focus on the fundamentals. I assure you that is a very good way to get sound sleep at night.

So, enjoy the dramatics, focus on fundamentals and sleep well at night.

I feel the markets should do well till May. Let us see.

1

Picking up the Threads

 Last post in Jan 2021, I said we should reach 15-16k which we have reached. Now what next can we expect from the markets. I expect a correction now.

1. 1 possibility is we correct 7511 to 16300 odd levels. A rise of 8800 points can get corrected by at least 4000 points. Levels to watch out in this case are 12940,11935 or 10890.

2. Another possibility is A wave was 12500-7500, B wave till 16300 odd levels and C wave down till 8269.

Whichever way I look the direction is down only.

Long term prospects are excellent and I will capitalize on the falls in the market.

What does Elliot say about the markets

 The markets tested new highs at 14753 and then there has been a violent correction of approx 1100 points so far. What does the future hold for the markets. Let us look at the fundamental and technical reasons affecting the markets.

Fundamentals:

1. Vaccine for Covid is here. The cases are going down and the economy is starting to fire. I see construction activity picking up and car sales sustaining. 2 sure shot indicators that the economy is doing well.

2. The US political scene is clear now and stabilized. The uncertainty is out of the way. Democrat control can mean more taxes but that is the only uncertainty.

3. The Indian budget is the immediate uncertainty for the markets. Once that is out of the way things should clear up.

Technicals:

We made a bottom at 7511.

1 count could be:

1. 7511- 9889 (2378 points)

2. 9889 - 8806 (1083 points)

3.1 8806 - 11794

3.2 11794 - 10790

3.3 - 10790 - 12025

3.4 12025 - 11535

3.5 11535 - 14753

Total 3rd wave is 5947 points which 2.26 times wave 1.

4th wave is correcting rise from 10790 to 14753 with targets of 13248, 12772 or 12303.

It could also be that 5 waves are complete at 14753 and we are correcting the whole rise.

My hypothesis is:

Wave 4 should end between 12500-13000 and we should have 1 more up move between 2500-3000 points to around 15-16 k before correcting entire up move.

Alternate theory is going back to 7511 which seems faint for now.

2020 H2 and beyond: where are our markets headed to?

 The first half of the year has gone by and there has been lot of chaos and confusion since my last post. Covid 19 has wrecked havoc. My level of 10000 was comfortably violated and much more. Let us see what can happen in the future.

1. The market is awash with liquidity and disconnected with ground reality. Covid 19 blazes on relentlessly. I expect the markets to move up maybe make new highs and then re test the previous lows or 6500.

2. The markets will remain buoyant in the near future as the US Fed also is pumping in huge liquidity. Next few months will be very good for traders.

3. One must trade also only in blue chips else one can lose one's capital.

4. Gold remains a safe haven and is a buy on dips as a hedge.

5. US Presidential elections are a key turning point and if Trump loses or if there is chaos after the results the markets will nosedive.

The key things for a sustained bull run are:

1. Cure for Covid

2. Stable US Government

3. Stable Indian economic policies

Right now only point 3 is somewhat under control. The run up is factoring in that a cure for Covid is given, things will normalize. If bad loans start popping up as they will after the next quarter results, then the markets will correct.

It is a traders market not an investors markets. Use the rally to throw out laggards.

6350 were multiple tops in the past they will be strong support. 12400 will now be the new resistance points.

2020 - What does it bring for the Indian Equity Markets?

A new year and a new beginning awaits the equity markets. India is on the cusp of a major structural change. The reforms initiated by the Modi Government will now start bearing fruits. Let me summarize what I expect from 2020.

Fundamentals:

1. The Budget will try and put more money in the hands of the tax payers. Expect simplification of the tax structure. As it is the tax payer base is low so it does not make sense to penalize the honest tax payer.

2. Expect the Cess on petrol and diesel to go up as it should be. Everyone fills petrol and diesel so everyone pays taxes. The black or white money debate is extinguished smoothly.

3. Expect disinvestment of PSUs. The Government has no business in running businesses and it should rightly step away.

4. Expect more pain in the short term but a bright long term future. Fast Tag is the best thing which was implemented in 2019. Leakage of revenue is stopped and transparency will be brought in.

5. Expect more political strife, more disruptions and more change.

Technicals:

1. 12300 is a key level. If it closes above this level decisively, then we can expect a rally to above 13000-13300.

2.  I still expect 10000 to be tested which may be totally wrong.

A bright future awaits India and I expect the golden years to just begin. Nifty 25000 is not distant dream and i see it being achieved before the sun sets on the Modi era.

Time will tell what the future holds for India. I predict a bright future.

Budget 2019 and its implications

Another budget came and went. This has significant implications as it is a forward looking budgets. Those looking for immediate results are likely to be disappointed.

1. The Model Rent Act is a big step forward. due to archaic laws people are hesitant to rent out homes. This will help the infra space also.

2. The hike in excise on Petrol and diesel is significant as it will help flush out black money. Even the non tax payers fill petrol and diesel so everyone pays taxes.

3. Lowering of promoter holding to 65 % will bring liquidity especially in the MNC stocks. It will lead to more participation by the retail population.

4. Borrowing in foreign currency will strengthen the rupee and keep interest rates low.

This budget is the first step in the long term roadmap towards the 5 trillion dollar economy mark. The markets will react negatively initially but over the long term it is a buying opportunity.

The time to invest in good stocks is now and they will reward investors over a 5 year period.

11300-11500 can be considered as the base for the markets. The patient investor will be the one who will be rewarded.