According to Mark Galasiewski, editor of Elliott Wave International’s Asian Financial Forecast – Sensex will hit 100000 by 2024. His report identifies India as one of the “baby bulls” along with Taiwan, New Zealand and Korea.
This report was published in April 2009 when the Indian stock index (Sensex) was below 10000. So it was a bold prediction to say that the sensex will rise by 10 times in 15 years. So what is this “Elliot wave” principle and how can we benefit from it? lets dig in
What is Elliot Wave Principle?
The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Ralph Nelson Elliott published his theory of market behavior in the book The Wave Principle (1938).
Elliott’s model identifies waves 1,3, and 5 as “impluse” waves waves. They are easy to recognize and move with tailwinds. Waves 2, and 5 “corrective” waves, and move with headwinds. Additionally impulse waves are subdivides into five waves and corrective waves subdivide into 3 waves. This report in April 2009 identified sensex to be in the third wave, eventually rallying to 100000 by 2024.
Can Sensex really hit this target?
No one can predict the future. But looking at India’s middle-class and GDP growth forecast over the next couple of decades, this seems achievable. It will not be smooth ride though.
How to act on this prediction?
If this prediction or anything close to this were to come true, then Indian equity investors who have time on their hands are in for a bonanza. Just apply these 3 principles over the long run to cash in on the sensex rally.
- Adopt a Systematic Investment Plan (SIP) and invest regularly
- Spread investments in 4-5 Equity diversified funds (large cap and mid cap)
- During extreme market corrections, don’t panic but invest more if possible. Also don’t get frustrated with range bound markets