Are SmallCaps Joining the Big Bad Bull Run?

If you take the Nifty turnover (weighted sum of the turnover of all Nifty stocks) and compare it with the turnover of other indexes, what can you see?

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The Nifty:Smallcap turnover ratio has come to yearly lows, and at the same time, the smallcap index itself has underperformed the Nifty massively in the year, down 10% versus Nifty’s +6%

But the green area at the bottom is the actual outperfomance (the difference between the Nifty’s and Small cap performance relative to the start of the year). That tells use that while the Nifty outperformed till September, things have changed quite a bit since then, with volumes shifting towards the small caps on a relative basis.

Since institutions don’t usually trade the small caps, you can assume that the trading volumes dictate shifts in retail investors and broker sentiment. Purely looking at volumes (instead […]

By |December 30th, 2013|Categories: Nifty, Trading|3 Comments

Premium: What’s With The Nifty EPS Crash When We Hit All-Time Highs?

Thanks to those of you that attended the Capital Mind Premium Webinar on Saturday! We addressed the Current Account Deficit and looked at some interesting charts and numbers.

This is an archive of the Capital Mind Premium post sent on 9 Dec 2013.

By |December 10th, 2013|Categories: Bonds, Nifty, Premium|Comments Off

Even at All-Time High, The Nifty Must Double From Here to Adjust for Inflation

As the Nifty hits a new high, it’s useful to see Nifty adjusted for inflation – that is, despite the fact that the Nifty has hit the highest ever value, what does it mean for you once adjusted for inflation?

For this, we look at purchasing power of the money you have today. We have two inflation indexes – the Wholesale Price Index (WPI) since 2000, and the Consumer Price Index (CPI) for Industrial Workers since the same date.

Take an investment in the Nifty in the year 2000, and then “adjust” it for each of these indexes. If the index was 100 in 2000, and it’s now 180, that means prices are up 80% since then. So a Rs. 10,000 today will not buy you what Rs. 10,000 would buy you in the year 2000 – it would buy you, in 2000 terms, things worth Rs. 10,000 * (100/180) = Rs. 5,556. So effectively, you had to grow your money […]

By |December 9th, 2013|Categories: Inflation, Nifty|Tags: |5 Comments

Nifty Hits All Time High at 6400 on State Election Result Euphoria

The state election results are out: the Congress has been decimated in nearly all of the four states for which results were announced yesterday. (It is, however, leading in Mizoram, where results are being declared today)

With a BJP majority in Madhya Pradesh (72%), Chattisgarh (54%) and a whopping 81% in Rajasthan, the mood of the country is fairly clear. That they don’t like the ruling party (Congress) at the centre; the state moves reflect that sentiment.

Delhi poses an interesting situation with the Aam Aadmi Party (AAP) getting 28 of the 70 seats, and the BJP 31, and the Congress lost with just 8 seats after ruling Delhi for 15 years.

The markets have cheered the result, with the Bank Nifty going up 3%, and the Nifty up 2% in early trade. The reason? That this reflects a thumbs-up for the BJP in the parliament elections of May 2014, with enough strength to help push the economy forward after the Congress’ […]

By |December 9th, 2013|Categories: Nifty|Tags: |Comments Off

October Has Been the Month for….Realty

THe Nifty is up nearly 8% in October and there are 10 days left! You might think housing prices have stagnated, or gone down. But October’s given a huge move to realty stocks, as they outperform everything else.

Sector Moves: October 2013

Yes, IIP was bad, and Inflation was high and GDP growth was low (announced on the 30th of Sep) and liquidity is tight and there was a US shutdown + debt limit + everything. But that was a wall of worry that stocks climbed, and climbed fast.

In 2013, we’re now up 4.8% on the Nifty, and the outperformer of the year is IT, followed by Pharma and FMCG:

YTD Performance[…]

By |October 20th, 2013|Categories: Nifty, Stocks|Tags: |1 Comment

Nifty P/E Beats EPS Growth Marginally, Then Breaks Off Downwards Again

The Nifty P/E (Price to Earnings) ratio seems to have gone a little astray towards the end of September, as another quarter ends. At 17.32, the Nifty is not cheap (this is standalone, not consolidated) but what’s interesting is that recently, the P/E was less than the actual one year Earnings Per Share (EPS) growth in percentage, a phenomenon that hasn’t happened since 2008.

Nifty P/E versus EPS Growth

Of course we’ve gone off now, down to 14.6% YoY growth on the Nifty Earnings per Share.

Note: Nifty P/E is released by the stock exchanges every day, and updated when earnings are updated. Nifty EPS is simply the Nifty value divided by it’s P/E.

Consolidated earnings should actually show a lower P/E (since earnings will be higher). I think I’ll […]

By |October 6th, 2013|Categories: Nifty|Tags: |3 Comments

Chart: Nifty Returns Till September, Over the Years

Upto September, the Nifty has returned -2.9%, staying a negative year again. How has 2013 been, though, compared to the others? A quick comparison of till-September returns shows that 2010 isn’t by any means an abnormal year; in fact, it’s a lot less off the center than most years.

Nifty Returns YTD Till September

There’s three months left. How do they go? My bet is: volatile.

By |October 1st, 2013|Categories: ChartOfTheDay, Nifty|Tags: |Comments Off

The Rajan Month Takes Us +6% But Ends on a Depressing Note

September 2013 was when Raghuram Rajan became the RBI governor and that gave markets a high. However, on the last day of the month, markets retreated 1.7%, taking the 10% gains down to 6.1%, and the 6,000 mark away from the month’s achievements.

The big bad month of October is coming by that’s seen some crazy moves in the past – +17% in 2007, +26% in 2008 etc. The standard deviation is 9.2% from an average -1.5%, so it would be crazy to predict which way this goes purely on historical month-end data.

Nifty Monthly Returns

And for completeness, the Sensex:

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By |September 30th, 2013|Categories: MonthlyMoves, Nifty|2 Comments

How Have Stocks Done In a Month of High Carry?

Last week was the Futures and Options expiry and something strange happened. The Nifty October Future – 1 month away – was at a 1.1% premium to the Nifty, something that hasn’t happened too often. This is effectively a 13% “carry” for a month.

Let’s take a look at high carry situations in the past. When the Nifty next month premium (the difference between the next month future price and the Nifty spot) on expiry day has been very high, how has the Nifty performed in the next month? (HT to Vish for this post)

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The big -34.7% move was in the 2008 time – the big Lehman move.

The stats show:

By |September 30th, 2013|Categories: Futures, Nifty, Technicals|Tags: |1 Comment

Gold Returns Adjusted for Inflation Since 2007 are Stellar, PPF Not So Much

Continuing the series on adjusting things for inflation, readers complained that hey, I wasn’t really playing fair talking about just the Nifty. How about the Public Provident Fund? PPF is where you can put your money and interest is compounded tax-free.

Rates of PPF are taken from Wikipedia, and the returns, adjusted for CPI Inflation, have been less than inflation since 2007. Which means, adjusted for inflation, even the PPF would have given you negative returns. (PPF accrues interest monthly, compounded in April of each year)

Let’s also add Gold, because that was another asset class you could have parked money in. Again, adjusted for Inflation

Here’s what it looks like:

Investments Adjusted for Inflation

Your purchasing power, for an investment made in the most tax-efficient, most secure investment (PPF) […]

By |September 29th, 2013|Categories: Gold, Inflation, Nifty|Tags: |11 Comments

Nifty Stocks Above DMA Shows Potential Fall

A proprietary indicator I’ve developed, called the “Net stocks above the 20 DMA” is showing a potential steep fall in the index. This is calculated by finding out the number of stocks that are above their 20 day moving average and subtracting from it, the number below. This will oscillate between +50 and -50 (for the Nifty).

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I’ve observed that the 20 DMA line (red in the chart above) oscillates to extremes. When it pulls back from those extremes is when there is a potential trade.

Every time the index goes above 40 and comes back to below 35, it seems to lead the indication of a big fall coming up. However no system is perfect, so you can assume that once in a while the signal will not perform. Also, in the past the […]

By |September 25th, 2013|Categories: Nifty|Tags: |5 Comments

Near Record Number of 4% Weekly Moves in the Nifty; 2013 Brings Volatility Back

Oh, Volatility is here. I had written in April that we were seeing unusually low volatility for what should be a much more squiggly index, with zero 2% days in 2013 (then). And it turned out even weekly volatility was very low, with just one week of a 4% move.

Things started to move back to normal in the second half of the year, with 12 big daily moves by August.

Oh, how things have changed in September. Look at the 4% weekly move chart now:

4% weekly moves

Things have really expanded and most of the above moves are after July.

And the daily moves, we’ve had six more in the last month, taking the count of 2% days in 2013 to 18:

[…]

By |September 21st, 2013|Categories: Nifty|Tags: |Comments Off

The “Real” Nifty, Adjusted for Inflation is 32% Below its 2007 Peak

When you adjust for inflation gains look terribly low. Inflation is how much your money’s purchasing power reduces. So you have to adjust for that, so let’s assume we invested X rupees in the stock market, got dividends and reinvested them, what would that money be today (in the same purchasing power that I originally invested them as)?

We are probably just 300 points from an all time high (5%) and but the difference if you consider dividends and inflation is much lower.

Nifty Adjusted for Inflation

This is only with WPI inflation. With CPI, which is at 9% but doesn’t have such a big history, things are much worse!

Note: Reader Nikhil asks me to put in the Nifty TRI (Total Returns Index) for a comparison. Your wish is my command!

[…]

By |September 20th, 2013|Categories: Inflation, Nifty|Tags: |14 Comments

Snapshot: Massive Upmove Due to Fed, but Banks Shine Nevertheless.

We’ve just had a +3.7% day, and this brings us fairly close to the all time high.

Nifty Snapshot

And if you look at various sectors, banks shine as outperformers.

Sector Performance

Banks did over 20%, and Infra and Realty have been helped.

Will this last? Let’s try and look at this again after September is really behind us.

By |September 20th, 2013|Categories: Nifty|Tags: |Comments Off