COMPARING NOTES

Deja Vu? NSE curve points to better times NSE Nifty has resemblance to trends of 1999 Anand Rawani NEW DELHI      HISTORY, it seems, is repeating itself. The movement of the NSE Nifty in 2009 has resemblance to the technical trends of 1999, and if the same logic holds true, the Nifty could well touch its all-time high in the next two months, a joint analysis by SundayET and Eastwind Capital Advisors, an investment advisory firm, reveals.      The analysis compares all four phases of market trends and the underlying economic conditions a year ago. The similarities do not end there. Both the rallies of 2009 and 1999 came after a severe financial crisis.      Analysis of the movement of the Nifty during 1999 and 2009 shows that there were two upward rallies and two small declines between April and November in both the years. The first upward rally in 1999 was between April 1 and May 19, when the Nifty went up by around 11%. In the second phase, between May 19 and May 28, it declined by around 8%. After this small decline the bulls pulled the index up by around 39% in the next upward rally that took place between May 28 and October 14. After every top, bottoms are formed and so in the next phase bears outpaced bulls and the Nifty declined by 17% between October 14 and November 1.      Similarly, in this year the Nifty formed four main phases. The period between April 1 and May 20 can be termed as first phase when the Nifty appreciated by 40%. In the second phase — May 20 and July 13 — it declined by 7%. Again the bulls triggered a 29% rally in the third phase, which took place between July 13 and October 17. Similar to the trend in 1999, in the fourth phase between October 17 and November 3 this year the Nifty dipped by 11%.      After the decline in the fourth phase in 1999, the Nifty appreciated by 38% in the next two months. And if it isn't a mere coincidence but a rational reaction of investors in a given market condition, the equity markets are going to go up in the next couple of months.      "We also did this analysis, we agree with the outcome. We see a strong upward rally in the next few years," says Waqar Naqvi, CEO of Taurus Mutual Fund.      It's not just the numbers. There are other similarities in economic conditions: in 1997-1998, the global financial market crisis started with the collapse of the Thai baht in July 1997 and continued with the Russian financial crisis of August 1998. Finally the crisis culminated with the collapse of Long Term Capital Management (LTCM) in September 1998.      Similarly, during this 2007-08 crisis, it started with sub prime crisis in April 2007 when New Century Financial, which was the second largest originator of sub-prime mortgages in the US, filed for bankruptcy. The crisis continued with Bear Stearns requiring emergency funding and later being acquired by JP Morgan during March 2008. The crisis did not end there. Lehman Brothers filed for bankruptcy on September 15, 2008.      anand.rawani@timesgroup.com