One of our favorite themes in the last 6 months has been India, in particular its stock market. Initially, we identified India as the most interesting emerging market, with approx. 7% real GDP growth over 2015 combined the most constructive chart setup. As stocks were almost collapsing back in January and February, Indian stocks successfully tested their support line, and remained within their triangle-alike chart structure (see below).
In April of this year we finally got a breakout, and adviced our readers to wait for a pullback and successful retest. That retest took place this month.
All conditions are met for a great bull trend. Indian stocks are a prime example of a text book breakout, as seen below on the chart of the Nifty 50, the index of the 50 largest Indian companies. From a technical perspective, the 90 week moving average, the only technical indicator in our methodology, is still flat (it did not decline as Indian stocks retraced), confirming the validity of the coming uptrend.
One of our readers reached out last week with the question on how to ride the new Indian stock bull market: “Would the NIFTY be a the recommended vehicle for an Indian rally or an ADR for individual stocks?” We believe the INDA ETF is a reliable ETF as there is a high trading volume, and perfectly tracks the NIFTY 50 Index. We believe you should create your own basket of stocks only if you are sufficiently familiar with Indian companies.
Are all emerging markets going to follow India’s bull trend? That could well be the case, we simply do not know. Last year, China’s stock market exploded as well, while other emerging markets were declining or flat. Basically we do not really care, as, based on the analysis we made recently, India had the greatest setup of all emerging markets, which is the reason we believe it deserves the highest attention of investors.