Volatility in India stocks spiked higher last week as panic set in the nation’s financial shares and dragging down Bank Nifty and other benchmark Index. Investors confidence remain fragile after the recent default by IL&FS (Infrastructure Leasing & Financial Services). Then last Friday, India’s central bank rejected the tenure extension of  Yes Bank’s Chief Executive Officer. Yes Bank (OTC: YYBKY) plunged 29% on the news and hit the lowest level since 2016, dragging other major India benchmark. Dewan Housing Finance followed along and saw its stocks falling by 43%, the steepest on record. At one point during the day, Dewan fell as much as 60%. The panic was triggered by investor’s speculation that the debt default by IL&FS may spread to other lenders.

Sensex benchmark equity index experienced the most volatile intraday move in more than four years. It swung from 1% gain earlier in the day to a drop of 3% before ending the day down 0.8%.

Some investors are speculating that the RBI (Reserve Bank of India) may tighten rules for housing finance firms after a loose policy led to the increase in bad debts. The central bank has taken a tough stance with the private sector banks lately. It has also refused to extend the tenure of Axis Bank’s CEO before.

How does India’s market look like after the carnage in the financial sectors last week? We will use Elliott Wave to see if there’s any significant technical damage to the Bank Nifty Sector Index. Bank Nifty represents the 12 most liquid and large capitalized stocks from the banking sectors which trade on the National Stock Exchange (NSE).

Bank Nifty Long Term Elliott Wave Outlook

The rally from March 2009 low in Bank Nifty is proposed to be unfolding in a 5 waves impulse where Super Cycle wave (I) ended at 13303.6 and Super Cycle wave (II) ended at 8366.7 as a FLAT. In the proposed count above, Super Cycle wave (III) remains in progress and the subdivision is also in 5 waves impulse. Cycle wave I of (III) ended at 20907.5, Cycle wave II of (III) ended at 13407.25, and Cycle wave III of (III) ended at 28377.9. Cycle wave IV of (III) pullback is expected to complete at 22621.5 – 24816.5, 23.6 – 38.2 fibonacci retracement of Cycle wave III of (III), then the Index can see 1 more push higher to end Cycle wave V (III) before another bigger pullback.

The selloff from Yes Bank, which is constituent of the Bank Nifty therefore hasn’t dramatically changed the outlook of the Bank Nifty, and we still expect dips to be supported in 3-7-11 swing.

Bank Nifty Alternate #1 Long Term Elliott Wave Outlook

In the alternate view above, Cycle wave IV pullback is unfolding as a zigzag Elliott Wave structure and thus the current decline from Cycle wave III peak at 28377.9 will only end the first leg Primary wave ((A)). Index should then bounce in Primary wave ((B)) before another leg lower in Primary wave ((C)) to end Cycle wave IV. This view is also probable but does not change the overall view that Index should see more upside after correction is over.

Bank Nifty Alternate #2 Long Term Elliott Wave Outlook

The second alternate view is calling cycle from March 2009 low ended as 5 waves. In this scenario, the Index can see a larger 3 waves pullback to correct the entire rally from March 2009 low before the rally resumes. This is the most bearish view but looking at the Relative Strength Index (RSI), we observe that there is no divergence between proposed Super Cycle wave (III) and (V) in this count. Thus, as wave 5 in impulsive structure usually has a divergence with respect to wave 3, this view therefore is least favored.

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Nifty Elliott wave analysis suggests that the rally to 11171.55 high ended primary wave ((3)). Down from there, the decline to 9951.9 low ended primary wave ((4)) pullback. The internals of that pullback unfolded as Elliott wave double three structure with sub-division of 3-3-3 corrective swings in each leg. Down from 11171.55 high, the initial decline to 10276.3 low ended intermediate wave (W) as a Flat. Then the bounce to 10637.8 high ended intermediate wave (X) bounce. And the decline to 9951.9 low ended intermediate wave (Y) of ((4)) as Elliott Wave Flat.

Up from 9951.9 low, primary wave ((5)) remains in progress as impulse where intermediate wave (1), (3) & (5) are expected to unfold in 5 waves advance within lesser degree cycles. Whereas intermediate wave (2) & (4) are expected to unfold in 3 waves corrective sequence in lesser degree cycles. Above from 9951.9 low, the rally higher to 10929.2 high ended intermediate wave (1) in 5 waves structure. Down from there, the pullback to 10404.62 low ended intermediate wave (2) in 3 swings.

Above from there, the index is nesting in intermediate wave (3) higher. Where Minor wave 1 ended at 10893.25. And the Minor wave 2 ended at 10557.7 low. Near-term focus remains towards 11458.50-11584.44 100%-123.6% Fibonacci extension area of Minute wave ((i))-((ii)) to end the lesser degree Minutte wave (i). Later on, the index is expected to do a pullback in Minutte wave ((ii)) in 3, 7 or 11 swings before further upside is seen. We don’t like selling the index and prefer more upside as far as a pivot from 10404.62 low stays intact.

Nifty 4 Hour Elliott Wave Chart

Nifty MIDCAP super cycle from 2009 low remains in progress as an impulse and we believe the Index is still within the powerful wave (III). Rally from March 2009 low to November 2010 was wave (I), dip to August 2013 low completed wave (II). Up from there rally to April 2015 peak (3581) completed wave I of (III), dip to February 2016 low (2633) completed wave II and we can see that rally from there was an extended wave III in which wave ((1)) of III ended in October 2016 (4183), wave ((2)) of III completed in December 2016 (3471), wave ((3)) of III completed in July 2017 (4816), wave ((4)) of III completed in August 2017 (4399) and rally in to January 2018 peak (5722) completed wave III. Index is now in wave IV pull back to correct the cycle from February 2016  (2633) low as the chart below shows

NIFTY MIDCAP Index Weekly Elliott Wave Analysis

NIFTY MIDCAP Daily Elliott Wave Analysis

Daily chart of Nifty MIDCADP Index shows wave IV pull back has the potential to take the form of a double three ((W))-((X))-((Y)) Elliott wave structure . Decline from wave III peak (5722) to 4787 was in 3 waves and has been labelled as wave ((W)), this was followed by a FLAT to 5474 that we have labelled as wave ((X)). As bounces fail below this level, Index has scope to make another push lower towards 4544.15 – 4320.78 area to complete wave IV and then resume the rally in wave V. We don’t like selling the Index and expect buyers to appear in 4544.15 – 4320.78 area if reached for new highs in wave V of (III) towards 6400 – 6427 area or a larger 3 waves bounce at least. Failure to make new lows and a break above 5474 would be an indication that wave IV ended already at 4787 and wave V higher is in progress as an Ending Diagonal structure.

 

The Nifty 50 Index has a bullish sequence from the lows to the all time highs. The index currently shows nine swings up from the all time lows into the 2018 highs. It is now correcting the cycle higher from the February 2016 lows. This is noted on the chart with the red 8 label. In this article there is not an Elliott Wave count on the chart as it’s the natural swing count the price and momentum indicators suggest. Notice from the all time lows to the 2008 highs appears to be 3 swings as noted with the red 3 on the chart. Next, the dip into the 2008 lows was strong enough to suggest it was then correcting the whole cycle from the beginning. That was the 4th swing.

From the point of the 2008 lows there are a couple of preferred ways to put Elliott Wave labels on the move.  I will focus toward the possibility of there having been a leading diagonal wave one with the 2008 lows being a wave two. If so, then it already saw a wave three that subdivided in three swings into the 2015 highs. That is marked with the red 7 and is similar to the wave one.

Continued below chart.

Nifty 50 Index Swing Sequence

The dip into the 2016 lows was strong enough to suggest it was correcting the cycle from the 2008 lows. This affirms the idea wave four is at the 2016 lows marked with the red 8. The bounce from there into the 2018 highs of course is the swing marked with the red 9. At this point of the 9th swing high, another option is possible as far as an Elliott Wave count. This 2018 high can be the larger wave three high of the cycle that started in 2008. The other is it only half of the fifth wave which would still need another swing higher.

In conclusion, there are several other correlated instruments and world indices with bullish sequences. All of these are only correcting the cycle up from the 2016 lows. It is all one market and his index should be no different.  The longer term bullish up trend has temporarily stalled. After this correction of the cycle up from the 2016 lows it should see another move higher.

Thanks for looking and feel free to come visit our website and check out our services Free for 14 days and see if we can be of help.

Kind regards & good luck trading.

Lewis Jones of the ElliottWave-Forecast.com Team

Today, we will have a look at some Elliott Wave structures of Nifty which we presented to our members in the past at in the members area. Below, I attached our 4-hour weekend update chart presented to our members on the 03/04/18. Calling more downside after a double three Elliott wave correction.

We suggested to our members that NIFTY ended the cycle from 02/06 low in red wave X in a truncation at around the areas of 10610. Consequently, we mentioned that the market should ideally extend into new lows in red wave Y. In our Daily Live Analysis Session, we explained to our members that the European indices ended at that time a cycle and therefore we went with the more aggressive view in calling Nifty completed. With that said, we advised members that the right side remains to the downside in near-term. As we were looking for another similar 4-hour push lower.

Nifty 03.04.2018 4 Hour Chart Elliott Wave Analysis

 

In the latest Elliott wave chart below, you can see that Nifty continued the weakness nicely to the downside. As it took 02/06 low  (red wave w), it opened up a short-term bearish sequence from 01/29 high, targeting the equal legs of around 9740 areas. At this moment in time, Nifty has reached the 0.618-0.764 areas from red wave w-x. Ideally, we should get soon a bounce in possible black wave ((B)) before the market should continue the weakness to equal legs.

 Nifty 03.25.2018 4 Hour Chart Elliott Wave Analysis

I hope you enjoyed this short blog about the Indian Index.

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