Refer the link below where Kunal is trying to make some conclusion based on co-relation between Nifty, Bank Nifty, DOW & S&P. – LINK
Such instances indicate that there is an extremely strong correlation that exists over more than a decade, during which these markets have become more mature.
There have also been instances where the ratio has remained above/ below these critical levels for prolonged periods. The impact of a reversal thereafter has been severe and profound.
This brings us to a fair conclusion that such a relationship does exist and it can have a bearing on the market movement. And it is being watched closely by global funds and institutions.
• Current reading
– Dow vs Nifty: 2.17
– Nifty Bank vs Dow : 1.15
– Nifty Bank vs S&P500 : 10.16
As witnessed historically, if such a correlation recurs, then Bank Nifty should lead the correction. It’s, therefore, prudent, and hence non-damaging, to be more cautious at the current level of the market.
Remember, “While driving a car in fifth gear, ignoring even a small bump is enough to cause significant damage.”
After reading this article in ET, I read the comments also to understand how masses are taking up such views which is actually alerting us to stay cautioned on higher levels. You can see red circled comments which shows that lot of people are rejecting the claim and not ready to accept that market will correct and even if they are accepting they feel that market will not correct much because it is supported by DII money instead of FII.
Making such assumption that market will not fall or if it falls it will not fall much is actually a mass consensus hence one need to really stay cautioned and wait till the unexpected comes in.