Sucheta Dalal :Perfect 10? How will markets fare after a nine-week bull run?
Sucheta Dalal

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Perfect 10? How will markets fare after a nine-week bull run?  

April 12, 2010

For a straight nine weeks now, the 30-share BSE Sensex has been on an upswing. From 16,153 points on 11 February 2010, it has rallied to a high of 17,933 for the week ending 9th April. If past market trends are anything to go by, then the Sensex looks set to gain some more ground in this week.

Moneylife has been tracking every movement of the index over the past nine weeks. In our study of past performance of the Sensex, we have found that the index had witnessed a five-week, six-week, seven-week, and eight-week straight rally exactly 33, 22, 16, and 7 times respectively. The study has also correctly shown the probability of the index continuing its momentum in the subsequent weeks.

This time, the Sensex registered a 1.4% rise over the previous week, to post a nine-week straight rally. Based on our historical data, there have been five instances (excluding this time) of a sustained rally in the Sensex for nine straight weeks. What happened in the 10th week in these five cases? In all five instances, the subsequent week has reported a continuation in the Sensex rally. That translates into an astounding 100% positive outcome!

It is worthwhile to note that, on such occasions, the Sensex has risen by an average of 1.28%. The index has seen a maximum gain of 2.50% and a minimum gain of 0.02%.

These are indeed encouraging signs for the bulls, which are still upbeat on the market despite valuations now appearing stretched. Today’s 80-point decline and another possible soft opening tomorrow morning might just see more investors getting into the fray. —
Moneylife Digital Team

-- Sucheta Dalal