[Premium India] NIFTYNEXT50 Strength Suggests Higher Prices For Stocks

JC Parets
January 6, 2018

We don't just want to look at one index when we make decisions about the risk appetite for stocks in the current market environment. The idea is to look at all of them collectively. All of the Indexes in India can be found in the Chartbook updated on a regular basis with comments and annotations.

Today I wanted to point out the strength that we're seeing in one Index that stands out compared to what we're seeing in another. The focus of this post is in the value of the NIFTY NEXT 50 compared to just looking at the NIFTY 50 in isolation.

Here is the NIFTY 50, which is the more traditional way to gauge the health of stocks in India. Notice how our upside targets are being hit this month. This is based on the 161.8% extension of the 2014-2016 decline. You can learn more about these Fibonacci calculations here.

NIFTY 50 Weekly Chart

Now look at the Nifty Next 50 Index, which include the 50 stocks that are not part of the NIFTY 50 but are included in the NIFTY100. It's "the other guys" of the market that I think are worth paying attention to for clues about the next direction of equities in India. Notice how we've already exceeded our upside objectives. In fact, we broke out above the 261.8% extension of that 2014-2016 decline to really show how much stronger the Next 50 index is compared with the traditional NIFTY 50.

NIFTY NEXT 50 Weekly Chart

I think the weight of the evidence is suggesting that we need to remain bullish stocks if the NIFTY Next 50 Index is above 30,200. If we are below that, then an argument for a more neutral approach would make sense. But above 30,200 and we need to be very long of stocks in India.

Note: This strength in the NIFTY NEXT 50 Index recently inspired a new Index I built called the USA Next 50 Index. You can read more about that here if you're interested.

Don't forget to ping me if you have any questions, of even if you just want to say hi!

Cheers,

JC

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