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Market rally: Weak or Strong?
Fri, 5 Sep Pre-Open

The market has been hitting new highs every day. And with that, the interest levels in the stock market too are hitting new highs every day.

The clamour for higher Sensex levels is only increasing even as caution gives way to optimism.

Amidst this renewed enthusiasm for the stock ticker, there is a hot favorite question doing the rounds these days -

'Is this market rally strong enough to go higher? Or will this turn out to be the peak of the market when we look back one year from now?'

A leading business daily recently tried to answer this question with the help of some statistics. The Economic Times did a study of the price movements of 423 stocks that are part of the BSE 500 index, and a comparison with the trends prevailing around the last peak of the market during November 2010.

It observes that in the past three months, there were 14 days where more than 50 out of the 423 stocks hit their 52 week highs. Around the previous high of the 2010 period, there were 10 days when more than 50 out of the 423 stocks hit their 52 week highs. It further goes on to report that this year the record of number of stocks hitting their one year high in one day - 151 stocks - is far higher than the comparable 2010 period when the number of such stocks was 75.

So does this mean that this market rally is stronger than the previous one?

Well, implicit in such questions is always another question. Very nakedly put, it goes like this - 'Is the market going to go up or down?'

Strip it down to its bones in such a way, and it becomes easier to distinguish a speculative question from an analytical one.

It becomes important to highlight here that we have no confidence whatsoever in our powers to predict what will happen with the market next.

We reckon, neither should you.

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Feb 23, 2018 (Close)