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)



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

The stats show:

  • Average move: -4.7% (without the big Lehman move: -1.9%)
  • Upmoves: 4 (average +3.2%)
  • […]

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).


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

And…Nifty Turns Positive For 2013

With a nudge and a wink, the Nifty has gone from it’s deeply negative zone just one week ago, into marginally positive territory for 2013:

Sector Moves 2013

Of course, as you can see, this is heavily skewed towards three sectors – FMCG, Pharma and IT. This is also reflected in the change in the weightage of these sectors in the Nifty (ITC is now the heaviest weight).

The last week has been huge, since Dr. Raghuram Rajan took over last wednesday evening. In the four trading days, we’ve seen some huge upmoves. This supposedly is true, recently, of all emerging markets, so I might be giving the good-old-RR a little too much credit.


By |September 11th, 2013|Categories: Nifty, Sectors|Tags: |Comments Off

Nifty, 10 Year Bond Yields and Inflation

A great question for Prashanth: How does this chart from Ritholtz look like for India?

So I decided to plot the Nifty, the 10 year bond yield (month end values from RBI) and WPI inflation in a single chart.

Nifty, 10 year bond yields and Inflation

(Click for a bigger chart)

As you can see, India’s bond yields are not entirely related to the equity curve (other than from 2011, perhaps). As yields fall, equity markets should rise as money becomes less expensive to borrow – but in India, the bond market is not as well developed, so the transition was absent in the late 90s.

The early 2000s saw bond yields going up from about 5% to 8%, but the markets went up even […]

By |September 11th, 2013|Categories: Bonds, Inflation, Nifty|Tags: |4 Comments

Rajan Welcomed Well By Equity and Dollar, Bonds Don’t Like Him

The entry of Raghuram Rajan has taken the Nifty up 7%, and the bank nifty up over 12% from its lows. The Nifty is now touching the 50 day moving average.

Nifty Snapshot

(Click for larger picture)

The recovery came in on Thursday and Friday. Banks were up nearly 10% on Thursday, with a great follow up day on Friday.

However, this could still be a temporary move, as the US data shows a taper in US bond buying is much more likely now.

While equity markets rejoiced, bond markets didn’t. The two days of the new RBI governor have seen rising rates:


10 yr bond movement

And the dollar has improved dramatically:


By |September 8th, 2013|Categories: Bonds, ExchangeRates, Gilts, Nifty|Tags: |2 Comments

Nifty Drops 5% in Aug 2013, Worst Month Of The Year

The Month of August 2013 has not been kind to the Nifty, dropping 5.3% (and that’s not considering that on Wednesday, just two days earlier, the Nifty was actually 9.6% lower than the July close).

Nifty Monthly Returns

This is the worst of 2013, coming in August, taking the annual return down to –8.4%. We’re having  year similar to 2011 – then, the dollar depreciated from 44 to 52, and now we are down from about 53 to 66.

The return till August for the Nifty is:


We’ve had some volatile times recently and the good year has now switched to a bad year.

For completeness, the Sensex fell 3.8% (lower […]

By |September 2nd, 2013|Categories: Nifty|Tags: |Comments Off

Nifty Earnings Growth Spikes To 16%+

In cheerful news, the Price to Earnings Ratio (P/E) of the Nifty is at 15.79, which at a Nifty value of 5471 gives us an Earnings Per Share (EPS) for the Nifty at Rs. 346.

This is a 16.27% growth over the same time last year, which is about the highest we’ve seen in a while.

Nifty PE and EPS Growth

The last time the P/E ratio was lower than the EPS Growth number was in mid 2011, when the Nifty had fallen substantially. The dollar was starting to fall then, from Rs. 44 to 52 in about six months. Now, the dollar’s at 65.

The EPS growth has not come because of strong results. It’s due to the rebalancing of weights in the Nifty making certain stocks stronger which have better […]

By |August 25th, 2013|Categories: Macro, Nifty|Tags: |3 Comments

Volatility Increases: 12 Big 2% Moves in the Nifty in 2013

I was complaining about there being no big days on the Nifty in 2013 in April 2013, but boom, has that changed! This had moved to six in June 2013, and in the last two months we’ve seen six more such days.

Look at the graph now:


There are two –4% days in 2013, one last month in July and one today.

By |August 17th, 2013|Categories: Nifty|Tags: |3 Comments

Tech Gloat: Nifty Falls to Lower Bollinger Band, Is Airtel Setting Up too?

I wrote in a tech note on July 29 that multiple indicators point to a fall in the Nifty. Two very powerful ones seem to be an Bollinger Band rejection along with a MACD crossover. Here’s the Nifty chart I drew then:

Nifty July 29 chart

The Nifty has lost steam and hit the lower band hard, with the index falling over 2% today (August 6) for a fall to 5542, from the post level of 5886. This is a fall of 344 points.


So I’m going to feel good that this turned out okay..

Choosing the wrong instrument to trade can be a problem. I chose options to trade this and off the 344 I must have recognized just 150 points in […]

By |August 6th, 2013|Categories: Bharti, Nifty, RelCapital, Technicals|Tags: |3 Comments

“Sell in May and Go Away” Proved Right for the first time since 2001

July ends with a –1.7% return on the Nifty and it is the first time since 2001 that we have had a negative June followed by a negative July. This is not huge – the aggregate fall is less than 5% – but it does take the Nifty into a –2.8% number for the year.

Nifty Monthly ReturnsThe Sensex fell only 0.3%, the difference being the relative weights of stocks in the indexes, plus the fact that the Sensex has 30 stocks while the Nifty has 50.

Sensex Monthly Moves

And here’s the relative moves YTD till July:


By |July 31st, 2013|Categories: Nifty|Tags: |4 Comments