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Nifty In Technical Charts: Budget And The Modi Years

CK Narayan attempts to correlate two disparate elements—budget and price action.

<div class="paragraphs"><p>Coins stacked in bottle against a trading-graph in the background. (Source: freepik)</p></div>
Coins stacked in bottle against a trading-graph in the background. (Source: freepik)

2023 will be the ninth budget of the Modi era of India. The chart shows the score, in terms of market moves post-budget announcements across the last eight years. It seems to be an even match—four times for upward price action and four times down. This year will break this deadlock. The question is which way can it be? The chart shows the Nifty from 2014 to the present, the Modi years.

Nifty In Technical Charts: Budget And The Modi Years

It is difficult to transpose an economic event like the budget into a price chart. But we are going to give it a shot. Some of this may be esoteric to those unfamiliar with certain aspects of technical analysis. They can just use this as a (presumably) interesting read.

The arrow marks on the chart approximate to when the budgets were presented. (July in 2014, Feb. 28 in 2015, 2016 and Feb. 1 since 2017). Some notable observations from the chart (points 'a' through 'g') and some forward-looking forecasts (points 'h' through 'j') follow.

a. There have only been two very trended bull phases during the Modi era. These are 2016 to 2018, where the Nifty improved 43% and 2020-2021, when the Nifty shot up 143%. 

b. The other times have been spent creating channels of overlapped price action. These were 2014 through 2017, then again 2018 through 2020, and then once more after the 2018 top until now. These are marked with regression channels on the chart. 

c. The post-Budget gains appear to be front-ended. That is, the market seems to have been more hopeful in the first innings of Modiji with three of the four gains coming in 2014, 2016 and 2017. 

d. The Budgets for 2018 and 2019 seem not to have provided much directionality but had much volatility during that period, had no major changes but similar types of swings until it swung up higher before the crash of 2020.

e. From that low, the market swung up magnificently but that of course had nothing to do with any budget. That said, the 2021 budget saw a rally that year of about 30% higher to reach the end of the year top in October 2021. 

f. The good news is, barring the 2020 drop, all declines after a turn down post-Budget have been limited affairs, averaging around 15-16%. In contrast, the rises when markets look up from Budget times is clearly higher—around 28%. So, there is a reason to cheer if markets go higher and not much to worry if prices go lower post-Budget in 2023.

g. There is a loose 141-weekly bar cycle running through the course of the Nifty moves from 2014 till now. The Fibonacci section of this cycle would be around 86.5 weeks and the square root of the major low is also the same figure. The big rise terminated and turned in October 2021 after 86 weeks. The way all this ties in is somewhat difficult to explain in a limited article.  

h. After the big advance of 2020-21, it may be time for some consolidation. Previous ranges have seen four and three Budgets presented within them. Current one has just one and 2023 will be the second one. 

i. Since the high-end of the channel has been touched twice already, chances are that we may slip into a decline post the 2023 Budget. If the drop were to keep in line with prior averages, then we may see a pullback to around 16,200. 

j. The minimum time this should take should be into the first week of April 2023.

These cycles of price and time are coinciding with the projections for the year made in an earlier article. That was created with work mainly drawn on WD Gann approaches. Here, I have used a mix of price action, an important economic event, time and price cycles of those events, etc. It is interesting to see how the two analyses coincide in indicating a similar pathway ahead.   

This is certainly not trading or investment advice. It is an attempt to correlate two disparate elements (budget and price action). The tenuous link between the two is the emotions which the budget event generates, that transforms itself into beliefs and expectations of people and manifests later as the price action of individual stocks which finally dovetails into the moves of the Nifty.

As a student of behavioural aspect of price action, I keep looking at the expression of emotions of market participants through the medium of price. As the saying in the market goes, Bhav Bhagawan Chhe!

CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise, and NeoTrader; and chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.