Saturday, January 23, 2016

Nifty : A BEV (Bear Eye Views) analysis for 1995-2016 Monthly

"A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20 % or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market. "

Investopedia http://www.investopedia.com/terms/b/bearmarket.asp#ixzz3y2bzk0iu 


In marked contrast to views of the Bulls , who expect the prices keep rising one high after another, another bunch of peoples keep saying that the market had seen enough of highs ; they consider all high(s) to be last "All Time High" (ATH). 

The Bear’s Eye View as it’s no coincidence that this is exactly how Mr Bear sees each of these new all-time highs: whether it was 1001.53 during November 1995, or our latest all-time high of 9119.20 during  March 2015, all he sees are big fat ZEROS.  Mr Bear isn’t impressed by new highs in the   NIFTY because the only thing he cares about is how many percentage points he can claw back from each of them.  During bull markets, he’s lucky to get back 10%-15%.  These small-temporary declines are called “bull market corrections,” from which the Nifty will rebound to make another, in a string of new BEV_Zeros seen during a bull market.  Eventually however, every bull market reaches its final all-time high, as is painfully evident below. Mr Bear sometimes claws back 35% or more from a BEV Zero during historic bear markets. 

                      Bear’s Eye View (BEV) chart.

The NSE Nifty, starting from November 1995 to  January 2016,  BEV chart uses monthly data. 



BEV may be explained to be decrease from prior High , expressed as percentage ; more elaborately, (every month's Low  minus prior High) divided by prior high in %. As for example, the last ATH is 9119.20  which is  taken as " prior high" , subsequent monthly lows are used to determine the value for BEV ; BEV for January 2016 with monthly low taken as "7241.50  is (7241.50 -9119.20)*100/9119.20 = (-1877.7)*100/9119.2 = (- 20.59) .

Here is an analysis of 20 years 3 months (including current January 2016) of the Nifty :




In the first case, the correction was confined to below 20% . Next case, corrections, over 3 months were, of less than 20%, followed by more than 20% corrections during subsequent 4 months & peaking at 35.55 % & finally restoration to starting point/or above in 6 months of which  7-4= 3 months of BEV in excess of 20 
Rest of the table to be understood similarly.

In summary, it may be mentioned that out of 243 months of the NIFTY,
 BEV values  of 20 or more % were in 110 months,(45%) 
 BEV values  of  less than 20 % were in 79 months (32%) , and
 bulls were kings in just 54 months (22% over all)



1 comment:

  1. My observation is that fall should be more than 21.7%, and not 20% as general belief goes, to be called a bear market. Even then, fall from 6338 in Nov '10 till 4531 in Dec '11 was more than 30% over 13 months and yet it was merely a larger bull market correction as time proved.

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