Nifty

The First Four Months: 13.5%

1 Comment » Written on May 4th, 2012 by
Categories: ChartOfTheDay, MonthlyMoves, Nifty

With a marginally negative return in April, the markets have still managed to keep a double digit return for 2012, with a 13.5% return YTD.

image

And the Sensex:

image

In a random stat: we've had two consecutive months of less than 2% moves in the whole month. 2% is a randomly taken number of course, but the bare minimum I expect the index to move, in a month, is 2%. The last time we had such a situation was Jul-Aug 2010, and in September the index moved 11%. Prior to that was Jun-Jul 2006, and Aug 2006 saw a +8% move, and then Feb-Mar-Apr 2004 when in May (after elections) the Index fell 17%. I believe that we'll see some serious moves in the next two months; just don't know when and which direction.

Posted in ChartOfTheDay, MonthlyMoves, Nifty

Nifty Stuck Between 50 and 200 DMA

1 Comment » Written on May 3rd, 2012 by
Categories: Nifty

It's been a while since I've done a snapshot, but the Nifty seems to be coiling in between the two big DMAs. (Daily Moving Averages)

image

Even as the Nifty EPS increases to 291 (standalone), we notice that the market seems to have lost all the momentum it had in the near 24% rise in 2012.

The 50 DMA line has started to dip, while the 200 DMA line is still flat or sloping downwards. After a golden cross (50 crosses over the 200DMA) which happened in late Feb, we have consolidated around the 5100-5300 area. A death cross (50 goes below the 200) is at least 3 months away unless we see a huge dip right now,. Remember though that the consolidation might actually indicate an upmove, not a downmove.

It's quite strange that we remain this high even with all the stuff waiting to hit us, from bank NPAs to a slowing economy to a depreciating rupee to a rising fiscal or current account deficit. The market doesn't to care.

Posted in Nifty

Nifty EPS Growth at 7.4% for FY 2011-12

1 Comment » Written on April 2nd, 2012 by
Categories: Nifty
Tags:

The Nifty Earnings Per Share Growth (standalone) is at 7.4% as of March 30, 2012. The number is 283, up from 263 last year.

image

Five years ago, the Nifty EPS was 207. The Rs. 75 per share growth in five years is a mere 6.5% per year. Coincidentally, even the Nifty has gone up just 6.5% per year since then. (From 3800 to 5300)

As I’ve said earlier, the EPS growth isn’t very much and the current P/E ratio still shows 19. Even though the consolidated P/E is lower at around 16, one needs to see a better rise in EPS to justify these valuations. (Yes, I need to plot change in consolidated EPS as well).

Tags
Posted in Nifty

Monthly Moves: Consolidation in March

No Comments » Written on April 2nd, 2012 by
Categories: MonthlyMoves, Nifty

The Great Monthly Move post is here! A small negative month follows the great Jan+Feb story.

image

And the Sensex:

image

And yes, a great Jan + Feb + March too, the best since 2006.

image

Yes, chart overload. I will be packing up the computers tomorrow. So everything must go.

Posted in MonthlyMoves, Nifty

Markets Down 10% in FY 2011-12

No Comments » Written on April 2nd, 2012 by
Categories: ChartOfTheDay, Nifty
Tags:

After the financial year 2011-12, where do we stand? The market is down about 10% (from 5833 in March 2011 to 5295). There was a huge spike in the last week of March last year, but the overall change has been miserable.

image

In what was not a great financial year for the overall market, FMCG outperformed by going up nearly 25%. From HUL to Godrej Consumer Products to ITC. Auto and Pharma did quite well, as did discretionary spends.

image

The worst were Metals, Realty and the Infra/Power spaces. These have been hit hard, and if you stayed out of these sectors you most likely outperformed. Even though the dollar has fallen over 15%, the return from the IT pack has been negative. Midcaps fell a lot but have recovered substantially since December.

What’s next? Fundamentally, the coming quarter isn’t expected to be all that great in terms of results. Inflation has come down, but prices remain high (just that they’re not going higher?). The budget was at some level expected – that the government would raise taxes. But it has introduced a lot of uncertainty with respect to taxing investors that come in through Mauritius, or the GAAR provisions or otherwise. Even though they might bridge some of the deficit, the budget estimates are very optimistic in assuming that oil prices will fall (and thus reduce the oil subsidy by 35%), or that the GDP will grow nearly 16% nominally next year.

The dollar is back at 51 and our trade deficit is nearly $150 bn already. Much of this is oil, and unless we increase the domestic price of oil, we won’t stop using it, but there is no political will to let prices go up.

There is a liquidity problem at the bank end with huge government bond auctions coming our way from April. Repo borrowing is now running at nearly 200,000 cr. (2 trillion) every day, and recently banks have been tapping the MSF (Marginal Standing Facility) window which lets them borrow even more than they are allowed to, at 9.5% per year. Ultra short term mutual funds are returning nearly 11% now. The chances that RBI will cut rates in its April meeting are, in my opinion, 50-50.

But the situation in the US looks nice, and Europe to it’s credit is not cratering. That situation may change, but happy money from those countries is flowing in for now.

Technically, the market remains clustered within the 50 and 200 day moving averages. An indicator I use shows no real trade:

image

The trade is only at the extremes, and if anything, the risk-reward is greater on the upside. (Never trust your beliefs more than the price :) )

At the long term level there’s no extreme either:

image

The Wait and Watch strategy works for me as I move to Bangalore this week. Posting will be very light – and after my massive set of charts for the month,  I might lay low for a while, as I try to find a house and a school and get my life back in order. Happy trading and wish you all a great financial year ahead.

Tags
Posted in ChartOfTheDay, Nifty

Nifty Clocks 3.6% for Feb, Now Up 16.5% in 2012

1 Comment » Written on March 5th, 2012 by
Categories: ChartOfTheDay, Nifty

Looking at the monthly returns table shows a fantastic Jan + Feb for the markets, the best since 1994.

image

image

And we shouldn’t forget the Sensex either:

image

While 1992, 1994 and 2000 were very good in Jan and Feb, the indexes subsequently retreated the rest of the year; while 1985 and 1991 carried the returns onward to great returns (80%+). Where does 2012 go?

Posted in ChartOfTheDay, Nifty

Nifty Consolidated P/E is 16.16, Standalone is 19

2 comments Written on March 4th, 2012 by
Categories: Macro, Nifty

Looking at Q3 figures (now that all data is in) we have a pretty interesting result on the Nifty P/E. If I use the exchange methodology, then the way to get the Index P/E is to simply add up all the profits and use the formula:

Index P/E = (Sum of Market cap of all stocks) / (Sum of profits)

I’ve mentioned earlier that the index creators have said they only consider “standalone” profits, which according to me makes little sense now that many companies report consolidated profits on a regular basis. For instance, CAIRN has a standalone profit, in the last four quarters, of just Rs. 20.56 cr. while it has a consolidated profit of 8209 cr. Similar number differences are seen with Tata Steel, Tata Motors and the like.

(Standalone is just the entity, consolidated includes all subsidiaries as well)

So what is the index P/E if we consider consolidated profits where available and standalone where not? (You have to consider free-float shares – non promoter stake – to arrive at both market capitalization and earnings)

Consolidated P/E: 16.16

(Standalone P/E  using the same calculation, comes to 18.95 and the index released figure is 18.99, for March 2, 2012.)

Consolidated Earnings (adjusted for free float) are about 17% higher than standalone.

Using the free float factor changes things around but if we were to look at raw earnings,that is – net profit with no weights or free float adjustments, here’s what we have.

Nifty Standalone Earnings (Trailing 4 quarters): 192,746 cr.

Nifty Consolidated Earnings: 232, 275 cr. (21% higher!)

The point is that while we might look at P/E from the perspective of the exchange, which provides data only from standalone numbers, the real deal is only found by using consolidated figures. At a P/E of  16, India sounds less expensive than the 19 it officially quotes.

More interesting will be to see how the Nifty earnings have grown, when looked on a consolidated basis. That will unfortunately take a lot more work from my side, in terms of programming. We have to take the Nifty constituent stock changes in the past (for instance Coal India was added recently), and the number of outstanding shares for each stock would have changed etc. An exercise for another day!

Note: The full spreadsheet is here:

Posted in Macro, Nifty

Nifty Future Premium Near The Highest Ever

2 comments Written on February 29th, 2012 by
Categories: Futures, Nifty

What’s with the Nifty futures? With the Nifty closing at 5375, the futures were trading at 5441, a near 70 point premium.Measured as a fraction of the Nifty value, this is the highest premium we have seen since a freak day in 2008.

image

The future premium means that you pay more for the future than for Nifty spot; so if someone can buy the Nifty basket in the same proportion as the Nifty, then he can short the appropriate quantity of Nifty futures and make the difference (in theory, but in practice it’s hard to exit at exactly that price on expiry day).

This kind of premium is reflective of the “carry” interest rate; that is, how much interest you would make by buying the Nifty future (needs just 10% margin) and putting the rest in a bank.

Now 1.23% till March 29 sounds like a very good deal – it equals nearly 15% a year! At an individual stock level you might find even better deals – the current price of ICICIBANK, for instance, is Rs. 910 while the future trades at Rs. 923 – nearly 1.5% higher, translating to an 18% per annum trade.

The Bank Nifty trades at a 150 point premium now, which is 1.50% of the BankNifty spot – another easy arbitrage.

What this means is – according to me – no one is going short. Since you can only short through futures positions, people who go short will automatically bridge gaps between the cash and the futures prices. But with the lack of arbitrageurs and the unwillingness of participants to trade the short side after a sharp 23% upmove, the Nifty premium has built up.

There will always be some premium justification because of STT. The tax adds up to 0.25% for a cash transaction (buy+sell) and 0.017% on the futures side, and along with other costs might add up to 0.30% for a trader; that’s around Rs. 15 premium that no one will bother to bridge due to transaction costs. But even with those costs, a trade makes Rs. 55 for a Nifty arb, with is about 1% for a month’s exposure (could be lesser if the premium comes down intra-month!).

Are there other explanations? There are no changes to the Nifty coming up, I think (the last change was in Oct 11, when COALINDIA came in). Looks juicy, but what am I missing?

Posted in Futures, Nifty

Your Friend, The Trend, Is Up

3 comments Written on February 13th, 2012 by
Categories: Nifty

Every week I feel the market has peaked. And every week it goes a little bit higher. The trend is consciously up, and the market is trying to work through the strong upside resistance at 5400. The weekly graph shows serious volume, and an MACD line that wants to go above zero. (the MACD Line above zero is a bullish indicator)

 

image

With the resistance at 5400 – because of earlier stops around here, there will be some back and forth. But every single day you watch bears get slaughtered with strong intraday moves up just when the market attempts to go lower. This is not a sign that there is no selling – but that the sellers are buying back almost immediately because they're getting so badly burnt.

When the last bear disappears, this rally is over. The sentiment remains negative, so we’re unlikely to break down too much. (Disclaimer: Long – and using long dated puts for shorts)

Posted in Nifty

« Older Entries Newer Entries »