[India Chart Of The Week] NIFTY50 vs S&P500 Ratio Approaching Critical Apex

JC Parets
January 16, 2018

When an asset class is in a bull market, it not only goes up in value, but it also outperforms other asset classes. So it's not just about the absolute performance, but about the relative performance as well. When stocks are going up, they'll outperform things Bonds or Gold, for example. In emerging stock markets, it's no different. When stocks in India are outperforming US Stocks, that is when I consider the bull market to be in full stride.

Today I want to point to an important development in the NIFTY50 relative the S&P500. This is how we can see if stocks in India are in a real uptrend, or just a market rising with the tide. 

This ratio chart goes back over 20 years and represents the NIFTY50 Index vs S&P500 ratio. When the line is rising, stocks in India are outperforming US Stocks and while the ratio is falling, that means stocks in India are underperforming US Stocks. Notice the underperformance of Indian equities since the pear in late 2010. So even as stocks have done well, they are not in that same secular bull market environment that we saw from the late 90s through 2007:

The question here is very simple. Has this digestion from the past 10 years run its course? Should we now expect stocks in India to begin a monster leg higher on both an absolute and relative basis? I think this chart above is going to tell us a lot about the strength of this particular segment of stocks in the world.

I'm in the camp that yes, we do indeed resolve this 10-year consolidation to the upside, and after 10 years of digestion, stocks in India continue their incredible appreciation to new all-time high levels.

This is a chart we will be discussing further in our Live Monthly Video Conference Call tomorrow. If you're not already a member, I encourage you to start a risk Free trial and join us!

See you then!

JC

 

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