After the stellar run in the past few months, this may be a profit booking exercise. The drop from 5178 resulted in investors rushing to book profits which further accentuated the fall . The fall correspond to 78.6% Fibonacci retracement of the 2008 fall. Similar correction were noticed at 38.2 % and 68.8 % levels of the fall.
The index has still returned 109% in a year. The fall may label as wave 4 correction to test weekly 20EMA at 4135, but the rally may continue with a lower momentum to retest the original target at 6124.
The chart still continue to show strength for the medium and long term indicating upside potential. Bears may be caught off guard as the pullback could be equally swift.
In any case the fall in China augurs well for India and other EM as the jittery investor start pulling out of China amidst high volatility.
