Trend Following the Nifty Index

Why Nifty suits trend following in India: markets trend for part of the time, Nifty is liquid and hard for one player to move, and events punctuate a long uptrend.

Trend following is a viable trading strategy. Globally, markets trend around 30–35% of the time. If we can detect the onset of a trend and then ride it, substantial profit can be generated. Accuracy is low, but the trending periods generate enough income to override the drawdown phases. The choice of instrument is very important, though: we need something likely to trend rather than sit sideways or stay volatile for long stretches.

In the Indian market, Nifty is the ideal candidate. As the chart posted on Z-Connect shows, Indian markets are in a long-term uptrend, though there will always be events that pull them down.

Barring any catastrophic events, India will regain the glory it lost during its colonial past. There was a time when India was called “the sink of the world’s gold” (Pliny the Elder, in 77 CE), until it was looted away. A long-term uptrend punctuated by event-driven down trends presents profitable turns for a trend-following strategy.

Nifty derivatives are also among the most liquid tradable instruments in the market. That liquidity reduces trade slippage and makes Nifty difficult for any single player to move in either direction. Our flagship product, TrendShikari NTS, analyses Nifty to power strategies with quality directional signals.