Tests of Technical Analysis in India

The study evaluates the economic feasibility of technical analysis in the Indian stock market. It discusses that technical indicators do not outperform Simple Buy and Hold strategy on net return basis for individual stocks. Technical indicators seem to do better during market upturns compared to market downturns. However, technical based trading strategies are not feasible vis-à-vis passive strategy irrespective of market cycle conditions. Technical indicators also do not provide economically significant profit for industry as well as economy based data. Combining fundamentals with technical information, we find, that technical indicators are more profitable for small stocks compared to big stocks and for high value stocks compared to low value stocks. However, the economic feasibility of fundamentals' based technical strategies is still questionable. Our results seem to confirm with the efficient market hypothesis.