The bear market that started in March last year has either already ended or is on the verge of reversing, says Mark Galasiewski of Elliott Wave International.
In an interview with CNBC-TV18, the analyst said the Nifty has been in a declining trend channel that shows up as a triple zigzag correction, separated by two bear market rallies. This, he said, was a sign that a reversal was on the cards.
"We are right close to the end of the correction. [At the most] I would be willing to another 4-5 percent correction that could take the Nifty down to 7,000 but it is unlikely," he said. "A rally is starting very soon: this week or next."
Back in 2009, Galasiewski had forecast the Sensex to reach 100,000 in 15 years. Today, considering that the Sensex has already nearly trebled from 2009 lows of 8,000, he said that his call may have been conservative on either price target or time or both.
Below is the transcript of the interview on CNBC-TV18.
Anuj: Is the correction over in India and are we set for a big up move?
A: Many of your viewers may remember that back in April 2009, that is almost seven years ago I made a very bullish call on CNBC-TV18 and that was for Sensex 100,000 within 15 years and Elliott Wave International has stuck with that. We have maintained that forecast. We see no reason to change it.
In fact the price action since then has merely continued to confirm that this is the correct view or at least it is suggesting that it is. So, regarding the recent correction of the past 10 months or so it is a relatively mild correction. We saw a much larger correction in 2011 and of course the correction in 2008 was much larger than that. This is a series of second waves, as we call them in Elliott Wave terms and this one we believe, the one of the past ten months is ending very soon.
Anuj: When you say very soon do you have any price target or time target for this correction to end?
A: It is very immediate, in fact it may have already ended or should do so within a day or so. On the screen in front of you, you may be looking at the Nifty 50 and you will see that the entire correction from March 2015 high fits very neatly into a declining trend channel and the pattern that we have annotated on the chart is called a triple zigzag correction.
It is composed of 3 declining zigzag corrections with the ends of which are labelled W, Y, Z separated by to intervening bear market rallies, the ends of both which are labelled X and that correction should be ending right here very close to the lower line of the trend channel. So, we think there is very little downside left to this correction where we are willing to allow another four or five percent correction down to the 7,000 level in the Nifty but personally I don't think it is going to get there. We have got a rally starting very soon, perhaps even this week or early next.
Sonia: Do you still maintain 100,000 target on Sensex by 2024 because at a stage like this it looks a bit tough but would you maintain that target or are you forced to revise your timeline lower?
A: Considering that we have already tripled since that time if anything my forecast may have been conservative primarily on price but perhaps even on time. If we have come this far in just almost seven years 15 years from the 2009 period may be certainly achievable 100,000 within that 15 year timeframe.
Sonia: How would do you approach the Nifty IT sector since you track that as well?
A: I would say it is outperforming quite well on a relative basis. When the Nifty has been declining as it has for so long during that period for example the Nifty has been down 20 percent and the Nifty IT index is simply down by about 15 percent over the corrective period. So, that is very good performance.
And if you look even just in the past week you have seen the IT index holding up above its prior week lows whereas the Nifty has fallen to lower lows in its corrections. So, it is very good short term relative strength and very good long term relative strength and more importantly from our perspective the pattern of the correction is very because in the ending diagonal triangle completes the final leg of the correction of a corrective pattern in this case. So, it is a very bullish technical action and in combination with the pattern the triple zigzag corrective pattern in the Nifty we think this combination is very powerful and is pointing directly to the end of the correction.
Anuj: What about global markets? How would you look at the brutal correction in the big developed markets like Dow Jones, Nikkei and DAX? Of course today we have seen quite a bit of recovery but we have seen quite a bit of sell off over the last fortnight.
A: Elliott Wave International's analysis is based on three measures primarily. We call it pattern, which is the Elliott Wave patterns; price relationships, the relationships between the waves and sentiment and by those measures we see some reason certainly in matters of price. Certainly by those measures we certainly see reasons for a possible upturn in certain markets, certainly India is one of those. It is probably one of the most bullish that we have identified in the world. But even in the United States we have seen some extreme sentiment readings in combination with some price behaviour that may lead to a rally in the short term.