The Cycle of 8

Share trading as a concept rooted in India long before its Asian peer’s and as a matter of fact earliest records of share market went back to 200 years with the East India Company.The Bombay Stock Exchange,the oldest exchange in Asia,traces its history to the 1850s, when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall.

Indian markets have their own share of Ups and Downs and are known to be volatile. There however are many interesting trend that have driven the markets. A few of them so punctual in there occurrence that they are hard to ignore and their reasons hard to justify.

Due to their historical appearances some of these trends have become a governing phenomenon for e.g. Technical analyst use Fibonacci retracement , which was earlier an observed trend have now become a tool for traders to set their trades. One of this long term trends is the ‘Cycle of 8’

The cycle of 8 is a long term trend that has governed the booms in the Indian Markets. The trend started in 1984 and from then on cycle of Eight years has repeated itself religiously total 4 times. The consolidation in each period during this cycle has started 4 years before the actual boom year.

The graphs show the actual market performance during the each octal boom.

Boom Year       growth from 4 year back

1984  First bubble              120%

1992  Harsha Mehta          500%

2000  Dotcom bubble        100%

2008  Subprime bubble     400%

2016                                       ???

The cycle points to 2016 as the next boom, it may appear a distant future as of now, but the consolidation year has come and by the logic of it Investments have to be made now in a systematic manner if not one time. 

The hypothetical graph on the side have been drawn considering the lowest of returns among the above stated boom years, actual could be much higher considering the way economy is growing. So this is the time to tap the low valuations and wait for the profits to ripe

Disclaimer : I am very bullish in long term on Indian Market.

Extreme optimism to Extreme pessimism

When I started investing in the Stock markets, one of my uncle, whom I suppose, have tasted the sourness of 2007 market fall, opposed it with full guns blazing. According to him I am too immature and inexperienced to understand the complexities of share market, till now he nags me about my % returns and what not.
            This is a common view of the retail Investor who was investing in the market at the time when Sensex was trading at 21,000 and the same Investor when listen to the expert saying him to invest today when Sensex is at 15,000, raise the eyebrows and is fearful to invest a penny in this market. This is a roller costar of extreme optimism to extreme pessimism. People are too fearful to enter even at these crazy low valuations which will surely give handsome returns with 1-2 year prospective.
Extreme Optimism in 2007 when the Sensex hit record highs on a regular basis and crossed 21,000 and the rupee strengthened rapidly against the US dollar to trade at highs of less than Rs 40. Forecast at that time was higher peaks for the Sensex and more strength to the rupee. India could do nothing wrong at that time and the whole world wanted a piece of it. Over bullishness lead to a disaster from which some are yet to recover.
Today, after four years, the Sensex, which closed at two-year lows of 15,350 on 19 December, when everything is going wrong for it. Domestic issues are compounded by global issues in the form of sovereign debt issues in the euro zone, is a classical bear market with extreme pessimism and where all news is bad news. The equity markets are giving good opportunities for investors who can get over their fears. Bear markets tend to depress prices more than warranted and that itself is a natural risk-control mechanism. Downside risk at every level becomes lower.


It is going to be difficult to put a time frame for this bear market to play out but it may well be sooner than later. Investors should not wait for the end of the bear run to invest; it is better to invest closer to the end of the bear run and this may well be now.

Sailing Uncertainties..

For an investor these times are irritating and challenging, he doesn’t know where to go, what to buy and so on. To be truthful I am in a similar dilemma. But analysis of various factors could prove vital in making judgments.

First let’s look at the general mood in the economy, it's not cheerful, double dip clouds hang over US, Europe facing it's consequences of greediness and East appears as stagnant as ever. In general prospective, the convoluted effect could result in another recession. But that’s not the complete picture, many governments and companies have learnt their lessons from the past, relative risk exposure of companies is far less than what it was in 2007-08 and hedging itself from the depression have been on agenda for many since 2008.

Let's now look at the policy making and decisions that could affect the global economy. In 2007-08 with the fall of Lehmann brothers the govt. were forced to make decision to avoid panic and compromise on various factors and some of those have come haunting us today. But this time is different, govt. and organisations are aware of the problems and the after effect of the incorrect decisions. It’s like advantage of facing the similar problem again.

Lastly let’s look at the growth prospective, business and govt. around the world have negative sentiments and are refraining from investing into new projects or new business, thus making long term growth story a little stagnating in relative terms. But the businesses are known for their mood swings and their scenario could change in future,with amendments on policy front by the govt. things could turn around, solidifying long term growth.

In an all, the clouds are dark and in short term more negativity could creep in, but for an investor of long term this is good news, it shopping time, continuously accumulate the businesses which have sound fundamentals and growth prospective. Average out your old hands if you believe in their business and believe in the concept of investing.