Home > NIFTY Strategy, Trading Ideas > Analysis of past NIFTY corrections

Analysis of past NIFTY corrections

Thursday, August 16, 2007 Leave a comment Go to comments

Let me share some of the data regarding past corrections/trend reversals in NIFTY from 1999.

  • NIFTY went up from 800 to 1800 from Dec 1999 to Feb 2000(120% gain) and came back to 1200 in next 3 months – 33% correction.

The index tried to come back to 1500 levels again but then again continued to fall back to 800 levels till Sept 2001.

Now lets take the 2003-2007 bull market corrections.

  • NIFTY went up from 900 to 1950 levels in 2003-2004 and corrected to 1300 levels(May 2004)– 33% correction
  • NIFTY went up from 1300 to 2148 levels and came back to 1900 levels(May 2005) – 12% correction
  • NIFTY went up from 1900 to 2670 levels and came back to 2315 (Oct 2005) –13% correction
  • NIFTY went up from 2315 to 3775 levels and came back to 2600 (May 2006) –31% correction
  • NIFTY went up from 2600 to 4250 levels and came back to 3550 (March 2007) –16% correction
  • NIFTY went up from 3550 to 4650 levels and came back to 4180 (Aug 2007) –10% correction(till date)

Looks like 33% is the max correction in the bull market. A correction beond that might signal the end of the bull market.This means that even if NIFTY falls to 3025 levels from 4650 constituting a 35% correction, You might still be in a bull market.

In the best case scenario, the fall in NIFTY might be arrested with another 2-3% fall.

Now these inferences are based on historical data, what actually happens is anybody’s guess.

Any other inferences which you would like to draw from this data?

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