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Charts & Analysis

Nifty more than 30% away from the 200DMA

Looking at the Nifty with it’s 200 day moving average (200DMA) produces a story of extremes.

Nifty more than 30% away from the 200DMA

(Click for a larger image)

Distance % is the difference with respect to the 200DMA, or (Nifty-200DMA)/200DMA.

The index doesn’t seem to stay above the 30% distance (from the moving average) for very long; the last two times it hit the 30% mark, it took between three to six months for a crash of sorts. But in both cases, it wasn’t that the 200DMA rose to meet the index, the index crashed to come closer.

In 2006 there was a 30% crash in May-June, and the index was 30% away from it’s DMA for about three months. In 2007, the 30% mark was breached in October, and it stayed breached till the crash in Jan 08.

For a more longer term picture, since 1997:

Nifty more than 30% away from the 200DMA

(Click for a larger image)

The dips don’t look big (this isn’t a log chart). Still, the index does seem to dip 20% after it stays away from the 200DMA for over a few months.

As of August 31, the Index is at 4662 and the 200DMA is 3526. The Index is 32.21% away.