EMH stands for Efficient Market Hypothesis.

The Efficient Market Hypothesis is a theory in financial

economics that suggests that it is impossible to consistently achieve higher-than-average returns in
financial markets because prices already incorporate and reflect all relevant information. In other
words, under the assumptions of the Efficient Market Hypothesis, it is believed that financial
markets are informationally efficient.

There are three forms of the Efficient Market Hypothesis:

1. Weak Form Efficiency: This form asserts that all past trading information is already reflected
in stock prices. Therefore, technical analysis, which involves analyzing past price movements
and trading volumes, would not be able to consistently generate profits.

2. Semi-Strong Form Efficiency: This form posits that not only past trading information but all
public information is already reflected in stock prices. This means that neither technical
analysis nor fundamental analysis (examining publicly available information such as financial
statements) would consistently lead to outperforming the market.

3. Strong Form Efficiency: This is the strongest version of the hypothesis, suggesting that all
information, whether public or private, is already incorporated into stock prices. If this form
were true, even insider information would not provide an advantage in consistently
achieving above-average returns.

Now, in the context of the Sensex, which is the benchmark index of the Bombay Stock Exchange
(BSE) in India, the Efficient Market Hypothesis would imply that the prices of stocks included in the
Sensex already reflect all available information. Investors, therefore, should not be able to
consistently outperform the market through stock picking or market timing strategies.

It's important to note that while the Efficient Market Hypothesis provides a useful framework for
understanding market behavior, it is a theoretical concept and does not mean that markets are
always perfectly efficient in the real world. Market inefficiencies and anomalies do exist, and various
factors can influence stock prices. Investors use a variety of strategies, including fundamental
analysis and technical analysis, despite the implications of the Efficient Market Hypothesis.