The stock market of India was a top performer throughout 2016. But what’s the India stock market outlook for 2017?
As usual, we start with a short overview of sentiment. In general, the Indian stock market outlook does not get a lot of attention, which is a typical bullish phenomenon. As said before, bull markets which go unnoticed have the most potential.
This analyst recently wrote that the Indian stock market outlook for 2017 is bearish. That is very strange to us, as the price levels mentioned by the analyst, e.g. 8600 points in the Nifty 50 Index, the key stock market index in India, do not seem to carry much value on our charts. We find important price levels at 8100 points and 7500 points, based on our chart analysis visualized below.
India stock market outlook still bullish for 2017
Basic chart reading of the Indian stock market reveals a long term pattern with very strong support at 7500 points. Worst case, the index will fall to that level, which still validates a bull market scenario. The other important price level is 8100 because that is the 90 week moving average (the only technical indicator which we monitor). As seen on the chart, that moving average has mostly acted as support or resistance in the last 5 years.
Although we do not focus too much on retracement levels, we see that the 50% retracement of the 2016 bull run coincides with 8000 points. We consider this more of secondary importance though, but it clearly shows how important the current 8000 to 8100 level is.
Our outlook for the stock market in India in 2017 is that it will start the year in a bearish way. We expect a quick turnaround into a bull market. The line in the sand is 7500 points, and we expect this level to hold. If not, for whatever reason, then market conditions would become concerning.
Update on our Indian stock market outlook
The Indian stock market currently trades at 8200 points. The first weeks of 2017 will be very important for India and its stock market, as its chart setup looks great at this point. After a correction in the fall of last year, the decline came to a halt lately. If the index goes higher from here, it would be extremely bullish as we would have a higher low, more than 5 pct above secular support (purple rising line on the chart). In other words, the rising trend would be validated, and it would, without any doubt, lead to a new attempt to break through all-time highs.
If the rising trend line will not break (read: the 7700 level is broken to the downside), we expect 2017 to be a very profitable year for global investors that are long the Indian stock market.
This is a much more constructive setup than the one above, which we took at at the end of sharp retracement.