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India Stock Market Outlook For 2018

The stock market in India is in great shape for almost 2 years now. The Nitfy 50 index representing the largest 50 companies on the India stock market exchange rose from 7000 points to above 10000 points in that time period. So does that result in a bullish or bearish outlook for the India stock market in 2018?

The short answer to this question? Our India stock market outlook for 2018 and beyond remains hugely bullish!

As a reminder, this is what we wrote more than a year ago in our India Stock Market Outlook 2017 when the Nifty 50 was trading at 8192 points:

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 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.

We remain bullish on India, though we sense that China could outperform India in 2018. Long term, however, India is a great place, and its stock market will outperform most of its peer stock markets.

India stock market outlook 2018: news vs fundamentals

As always, financial media steps in to make investors doubt. Believe it or not, most investors get trapped by information overload. They read and keep on reading until they get rely solely on information and news.

Case in point: the Indian stock market saw a flash crash today as reported here. This financial news site wrote that it hit “investor sentiment who dumped their shares in the market sending it into a tailspin. The NSE Nifty plunged 258 points within one hour.”

So what, a 258 point flash crash in a raging bull market as seen on below chart is literally invisible.

What about this financial news update: “As Indian equities are set to close out 2017 near all-time highs—and volatility hovers near historic lows—analysts say investors must keep an eye on politics for signs of a turn in the current bullish sentiment.”

As if some political evolution can stop a raging bull market.

Economic Times of India writes that India’s stock market overtakes Toronto, and that has not happened since 2008:

“Since then, India’s market swelled by $800 billion as investors flocked to a nation where the government boosted consumption through a job-guarantee plan, streamlined the indirect-tax system and opened more industries to foreigners. ”

All this may be based on accurate news and facts but in the end it is meaningless for investors. Smart investors turn to charts, sentiment and some really relevant fundamental data points in order to assess an investment opportunity!

Some of the important fundamental growth measures in India, according to TradingEconomics, is a strongly rising inflation rate which is bullish for stock markets as well as a strongly rising GDP rate.

India stock market chart going into 2018

In the end the real compass which smart investors use to navigate markets is the chart.

The long term chart of India’s stock market looks truly awesome. Note this recurring pattern of dips which test the long term rising support line (in red on the chart). They provide mega buy opportunities.

We observe two important resistance lines, one around 6000 points, and it got broken to the upside in 2014. The other one at 9000 points, and it got broken to the upside early this year.

We believe that India will do great long term. Specifically in 2018 we see a potential retracement taking place in case 10,000 points are broken to the downside. In that scenario we see a dip towards the 9,000 area which would offer a great buy opportunity.

Note that we are not necessarily forecasting a dip below 10,000 points. We are saying that, in case it happens, mega support at 9,000 would kick in.

How high can India’s stock market go? The potential is almost unlimited. And that, combined with great fundamentals and not so bullish sentiment (great from a contrarian perspective) is what makes us super bullish on India in 2018 and beyond.

india stock market outlook 2018

 
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