Demystifying Nifty Trading

Hello, friends. This is Vijay Bhambwani here. I hope my videos are helping you decipher the markets better and I'm able to help you garner better profits on both your trades and investments.

Friends, in this video, I'm going to talk to you about how there are time and price cycles in the markets and how the Nifty, for example, I'm going to show you a chart here, Nifty for example, basically makes fairly predictable and decipherable moves in the markets and how we can profit from this.

Nifty Spot Quarterly Chart

 

So coming up on your screen is a graph, is a chart of the Nifty. This is a quarterly chart. Each candle indicates one quarter or three calendar months of trading.

What I have taken is a period between 2001 to 2021. I'm recording this video on Thursday, and we don't know how the market is going to end at the end of December 2021. But I can hazard a guess because 23rd, the day on which I am recording this video is a weekly options expiry. Next week is going to be the monthly expiry of the December futures series, and what I'm going to share with you is a time and price movement that the Nifty has made.

What you're seeing on your chart is that the Nifty has a lost only on five out of 21 years in the last calendar quarter of the year, which is October, November, December quarter. Now, in those five years where the Nifty has fallen in the December ending quarter, in four out of those five years, we saw the next quarter, which is the January, February, March ending quarter, the markets reversed those losses of the previous year and go higher.

Of course, you must remember that the time period that we have taken saw a great, big bull market from 2001 to 2008. After that, you saw liquidity induced up move from 2010 onwards, thanks to the quantitative easing etc, and now in a post covid and lockdown phase, after March 2020, we've also seen a liquidity based rally coming in. But why don't the calendar quarters report a profit in 16 out of 21 years now?

Now cycles are something that I have talked about in my earlier videos. I have told you how the quarter ending is a very specific and very special time for the markets because both mutual funds and FIIs the foreign investment institutions, massage their NAVs for reporting in one domestic and one regional newspaper, which is the securities law in this country. Domestic mutual funds must disclose their NAV in at least one regional and one national newspaper.

Obviously, when you're going to talk about your report card in public, that report be good. So this is why we normally see quarter endings being a bullish period. Now, will this quarter ending December 2021 also be bullish?

It's an open question so far, but for the quarter to be bullish, the Nifty must end higher than 17,525 or preferably even 17,600 in the spot segment. Should that happen, a bullish quarter criteria would be satisfied.

This is why you're seeing how the Nifty fell sharply this week in the beginning of this week on Monday. But pulled back equally viciously because there is a quarterly cycle coming out at play and the bulls are trying to yank prices higher.

Now what happens in the quarters where the markets actually fell in the final calendar quarter of the year?

2008 in December ending quarter, the market fell. That was obviously the end of the bull market that started in 2003 and ended in 2008 January. So that was basically an extension of the weakness that started in January 2008.

In December quarter ended 2011, we saw a post effects of the global financial crisis, and the markets were fairly, fairly, nervous. The quarter ending December 2015 merits special attention. The reason being that the next quarter, which was March 2016, was also a bearish one.

Here in these two quarters, which is December ending 15 and March ending 16, the markets were viciously down, and the other time the markets were down, was when 2018 saw the December ending quarter being down.

Now, what really happens if December 2021 fails to fulfil the bullish quarter criteria?

Chances are that the decline, which will follow in the following quarter, which is March 2022, can see very high amount of volatility. There will be a big tug of war between the bulls and bears and statistical beta, which is pure price volatility. I don't believe in the VIX as much, the volatility index as much, and I would rather choose statistical Beta, which is pure price volatility of the underlying asset that trading, and I can assure you that statistical Beta will jump in January, February, March ending quarter, if the quarter ended December 2021 is not bullish.

So I believe that there is a fair degree of probability that the Nifty will be bullish December 2021 by at least testing 17,500 or testing 17,600. But in case it does not, we have some very, very volatile times ahead of us, and forewarned is forearmed, which is what I am trying to do to my viewers, that you should be prepared for extreme amount of volatility, if on 31st December, the Nifty fails to scale mount 17,500.

On this cautious and guarded note, I'll bid goodbye to you in this video, not before reminding you to click like on this video, if you liked what you saw. Subscribe to my YouTube channel if you haven't already done so.

In the comments section, good, bad or ugly, I always welcome your feedback and help me reach out to fellow like-minded investors and traders by referring my video to your family and friends. I wish you have a very, very profitable week ahead. Till then, Vijay Bhambwani signing off. Bye.