India's stock market performance over the last year is to fundamental market analysis WHAT a screeching police siren is to a baking soufflé. It causes it to collapse into a sagging, wilted mess.
Check it: In early 2009, India's economic outlook was as grim as a scythe and black hooded cape. Among the heaviest hitters was a huge outflow of foreign investments, 10 million job cuts by Indian exporters, the emotional and structural devastation from the November 2008 Mumbai terrorist attacks, the worst corporate scandal in India's history (The $1 billion Satyam Computer Services fraud known as India's "ENRON") --- AND, a 70% plunge in the Sensex from its January 2008 high.
Fundamentally, the SENSEX's sails were dead in the water. And, according to the mainstream news stories such as the ones listed below, that's exactly how said sails were going to stay:
- "The Bear phase does not seem to be ending; Gloom and doom seem to be never ending for the Indian markets. The ray of hope... has faded." (March 3, 2009 Money Control)
- "Why India Won't Rebound Soon... A host of economic and political challenges could keep a new bull market at bay for more than a year." (January 5, 2009 Barrons)
- "With no end to the economic woes in sight, both home and abroad, markets plunged further with the SENSEX closing at a three-year low." (March 13, 2009 Bloomberg)
- "For those tempted to wade in India's stock market... consider the advice that Punch magazine once gave a person who was about to marry: Don't." (January 8, 2009 Associated Press)
YET -- after hitting a three-year low in March 2009, India's SENSEX embarked on a powerful 50%-plus rally to the two-year high we see today.
As for seeing the bullish winds of change in India's stock market before they arrived, EWI's March 2009 Asian-Pacific Financial Forecast stands clear. In that publication, Editor Mark Galasiewski set the stage for an across-the-board surge in Asian stocks and wrote:
"Most Asian Pacific indexes are midway through the fifth wave declines. Once those impulses are complete, prices should rally for at least several months."
Soon after, a major trend-accelerating developement occurred to warrant an immediate bullish case. In the March 23 Asian-Pacific Financial Forecast" Interim Report," Mark presented the following close-up of the SENSEX Index and wrote:
"Prices have just broken above a downtrend line, imitating a pattern from 2004 that led to a strong rally. The daily SENSEX chart shows how the decline since 2008 can be counted as three waves... and opens the possibility of a rally back to near the 2008 highs."
17 months of gains later and the usual sources finally have a fundamental justification for the market's advance: A blistering 8.8% increase in India's second-quarter GDP. (Data released on August 31, 2010).
What's even more telling is the fact that while India's economy is sizzling its leader to the West -- the United States -- is fizzling. Second-quarter GDP growth for the U.S. was a glacial 1.6%. Not to mention a barrage of other statistics that confirm a resurgence of job, housing, and financial growth on Dalal Street; and a severe contraction of all three sectors on Wall Street.
Yet, despite the broad gap between their economies, the stock market performances of each country are nearly identical. Both the Bombay Stock Exchange's SENSEX Index and the NYSE's Dow Industrials hit multi-year bottoms in March 2009. And from there, the two markets embarked on a matching 50%-plus uptrend to within a few thousand points of their respective all-time peaks.
Two rallies. Two very different fundamental backdrops: Clearly something other than external data is driving the trends in financial markets. That something other is the Wave Principle.