Historically, the easiest money (in cash/equity) has always been made when the Nifty500 has outperformed Nifty50. This post analyses 20 years of Nifty500 v/s Nifty50, and attempts to predict the kind of Market we are in presently.
The analysis use a Custom Indicator -> ‘Relative Momentum’, developed in-house using TradingView PineScript.
- When Relative Momentum of Nifty500 is trending higher and in Green, there is very little chance that an Equity Portfolio will correct or be in Loss.
- When Relative Momentum is trending lower, it doesn’t mean Portfolios will go to loss, it just means that Nifty50 is outperforming the Nifty500 (in this case). But it also means its time to be cautious.
- The biggest corrections have always happened when the Relative Momentum was Red and also trending lower.
- During the COVID correction of early 2020, Relative Momentum was trending higher, which explains the rally that eventually followed.
- When Relative Momentum is Green & sideways, we are likely in a mature Bull Market
Nifty500 Relative Momentum is at a value of 0.03, there are multiple levels of resistance at 0.04, 0.05 & 0.08, but that doesn’t mean its time to be cautious, book profits on Equity & run away to debt instruments.
-> Present Market stage
As mentioned before, it’s the trend that is more important, which is still very much on the rise. But the present levels also means we will most likely see a minor pullback in the market breadth, which isn’t so bad. I’m expecting a prolonged sideways trend on the Relative Momentum of Nifty500 and we will enter a Mature stage of the Bull Market.
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