close icon

Nifty 50 Index Can Severely Injure the Bulls in 2021

The U.S. S&P 500 index is up 67.6% since its March low. The Indian Nifty 50 did even better than that. The benchmark index of the second most populous country has climbed 79.4% from its 7511 bottom nine months ago. It currently trades slightly below 13 500, not far from its recent all-time high of 13 549.

While the COVID-19 crisis, despite the newly developed vaccines, is far from over, optimism abounds in stock markets worldwide. We, however, have never been fond of buying at new record highs. Instead of joining the bulls near 13 500, let’s first see where in the big Elliott Wave picture does the current surge fit.

Nifty 50 Index forming a major Elliott Wave top

The weekly chart above reveals the entire price history of the Nifty 50 since its inception. What should worry the bulls is that its structure can easily be seen as a five-wave impulse. Labeled (1)-(2)-(3)-(4)-(5), the pattern has been developing within the parallel lines of a trend channel.

Wave (2) occurred during the Financial crisis of 2007-2009. Wave (3), which is also enveloped in a nicely-looking price channel, was followed by an expanding flat correction in wave (4). The coronavirus crash fits in the position of wave ‘c’ of (4).

Nifty 50 to Begin 2021 at Its Worst Risk/Reward Ratio Ever

Both corrective waves – (2) and (4) – ended shortly after touching the 61.8% and 38.2% Fibonacci levels, respectively. If the analysis so far is correct, the phenomenal rebound we’ve been witnessing over the past nine months must be wave (5).

Unfortunately for the bulls, the theory states that a three-wave correction follows every impulse. This means that once wave (5) is over, we can expect a major decline to drag the Nifty 50 back to the support of wave (4). Where exactly the top will form is impossible to tell.

However, assuming a reversal near 14 500 and bearish targets near 7500, we are talking about a possible 45%-50% drop. Given that its P/E ratio currently stands at an all-time high of over 37, it is not that hard to image the Nifty 50 being cut in half. As we head into 2021, the Indian benchmark has never looked riskier for investors.

Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

OMXC 25 Index Treading on Dangerous Ground

OMXC 25, more commonly known as Denmark’s Copenhagen 25 index, is trading at all-time highs. Slightly above the 2000 mark now, the Danish benchmark is up nearly 20% YTD and 109% from its March 2020 bottom. It turns out that quality companies like Pandora, GN Store Nord and Vestas Wind Systems can deliver some pretty…

Read More »

Nifty 50 Index – Assessing the Fifth Wave’s Progress

In our previous article about the Indian Nifty 50 index we expressed an opinion that its uptrend cannot be trusted for much longer. Our skepticism was based on the benchmark’s weekly chart, which revealed a clear impulse pattern. A three-wave correction follows every impulse, so with the price around 13 500, we thought it was…

Read More »

S&P 500: Turning Bullish While the World Fell Apart

We find it hard to describe the past twelve months. What a year it’s been. A little over a year ago, the world was in utter panic. No-one really knew what is going on nor what was going to happen next. The prevalent emotion across the globe was fear. In the financial markets that fear…

Read More »

NZX 50 Index On the Verge of a 40% Elliott Wave Drop

NZX 50 is New Zealand’s benchmark stock market index. It was created in 2003 and includes the 50 largest companies in the country. We stumbled on it while researching one of its components – The a2 Milk Company – but that’s another story. NZX 50 climbed to almost 13 000 earlier this month, up 58%…

Read More »

DJTA: Putting 50 Years of Data in Elliott Wave Context

Just six months ago, it felt as if the world was coming to an end. People in Europe and the USA were stockpiling necessities in preparation to isolate themselves for an unknown time period. The coronavirus panic had dragged stock market averages down 35-40% in just a month. It was the fastest plunge into a…

Read More »

DAX 30 Surged 50%+ in Three Months. Here is Why

THIS WEEK ONLY, in addition to the seven premium instruments, all our subscribers will receive ONE Elliott Wave analysis of DAX 30 as a BONUS. Subscribe NOW and get yours on Sunday, June 14th. The last time we wrote about the German DAX 30, the index was in a free fall. It was March 2nd…

Read More »

Elliott Wave Setup Sends S&P 500 12% Higher

As demonstrated in our previous article about the S&P 500, the stock market started climbing while the economy looked the weakest. Then, as the markets kept rising, a new conundrum occurred. How to explain the extremely wide disconnect between the stock market and the economy? GDP forecasts for Q2 are all over the map, ranging…

Read More »

More analyses