How rewarding is technical analysis in the Indian stock market?

This paper analyses the profitability of moving average based trading rules in the Indian stock market using four stock index series. The study finds that most technical trading rules are able to capture the direction of market movements reasonably well and give significant positive returns both in long and short positions. But these returns cannot be exploited fully due to real world transaction costs. Although the transaction cost has come down over the years, various components of transaction costs due to the bid-ask spread, brokerage, etc. will never be zero. The trading rules based on short term moving averages may be able to detect trends in financial series very quickly, but those rules also generate a large number of trades causing higher transaction costs. Thus technical traders have to pay more attention to minimizing transaction costs while choosing a trading rule. Nevertheless, profit opportunities from technical analysis continue to remain an interesting and debatable issue in the Indian stock market.