Tool · Business-cycle investing

Cycle Compass

Take the temperature of the cycle the way the rulebook says to: form the hypothesis with leading indicators, confirm with coincident ones, use lags only as a cross-check. Score each signal for India and the US, and the compass returns the phase, a confidence level, and the sector and ETF tilts for it.

Risk overlay external factors that can override an Indian mid-cycle reading

Brent above $85 for a month or more (imports late-cycle inflation into India) India composite PMI below 52 for two consecutive months US initial claims trending 20% above their low, or ISM below 48 FPI net selling for three consecutive months with a weakening rupee Nifty down 5% from its recent high (accelerate rule: pull the next tranche forward) Nifty down 10% from its recent high (pull two tranches forward)

How the phase is scored

Each signal is matched to the phase whose description fits best. Leading signals (composite leading index, PMI, credit growth, yield curve, market valuations and psychology) carry weight 2, 2, 1.5, 1.5 and 1; policy, earnings and inflation carry 1 each, and inflation is a lag, so it never decides a phase on its own. The phase with the highest weighted score is declared; confidence is the margin between the top two phases as a share of the total, mapped to Low (under 15%), Medium (15–35%) and High (over 35%). A Low reading is labelled Mixed and the compass recommends the barbell, not a directional tilt. India's thresholds are calibrated to its high trend growth: a "contraction" is a growth recession, not negative GDP.

Analytical framework for study, not investment advice. The author is not a SEBI-registered investment adviser. Phase patterns may not repeat; validate with your own judgement or a registered adviser.