Sell in May and Go Away Except When It’s A Darn Good Year Already

The Nifty, Year to Date, till May has had the second best return since 1999, eclipsed only by the stellar return in 2009.

image

Will it sustain?

In most earlier years that have seen more than 10% returns YTD in May, the momentum has sustained – 2009 ended up 40%. The years  1997 and 1999 ended up even higher than their May returns. 1996 was the outlier, starting at +20% in May and ending up -1%.

Maybe you shouldn’t Sell in May and Go Away.

Errata: The 1996 returns have been corected- bad excel magic! Thanks to Kora at @paststat for recognizing this.

By |June 2nd, 2014|Categories: Nifty|Comments Off on Sell in May and Go Away Except When It’s A Darn Good Year Already

Monthly Returns: Best Month of 2014 at 8% in May

Great Election month on the Nifty. Nothing like 2009, of course, which has a 28% green number that might not be repeated in the near future. But still, 8% for the month, and a +14% number for the year.

image

And on the Sensex too:

image

By |June 2nd, 2014|Categories: Nifty|Tags: |Comments Off on Monthly Returns: Best Month of 2014 at 8% in May

Nifty Uptrend Lasts 254 days Without 10% Correction, Second Longest Ever

It’s a new high! The Nifty crossed 6850 to make another new all-time-high. Here’s some key metrics, in a single chart:

image

We haven’t seen a 10% trend change for a very long time. Look at the trend graph:

image

This is constructed by calculating whenever the Nifty falls 10% from the last high or rises 10% from the last low. (The excel bit is complicated.)

What’s interesting is that the current trend is about the second longest trend in the last eight years.

However, it can easily last longer. The previous uptrend was nearly 450 days, while the current one is only 254 days (without a 10% correction).

Will you bet […]

By |May 12th, 2014|Categories: Nifty|Comments Off on Nifty Uptrend Lasts 254 days Without 10% Correction, Second Longest Ever

Nifty EPS growth at 7%, P/E at 19

After many results have come in, the Nifty EPS (earnings per share) calculated on a standalone basis is at Rs. 355.

image

This has moved from a base of Rs. 209 five years ago (after the crisis of 2009-09) at a pace of roughly 10% to 11% per year.

image

While this is exciting to see the 5 year growth uptick to 10%+, it remains too low by our own historical standards. Much of the recent uptick has come because of replacing loss making companies (like Ranbaxy) and replacing them with profit making ones (like Tech Mahindra).

The standalone P/E – the Price to Earnings Ratio – of the Nifty is […]

By |April 29th, 2014|Categories: Nifty|Tags: |2 Comments

Goldman Sachs’ Nifty 7600 “Target” is Just a Load of Bull

Markets supposedly went up today because Goldman Sachs upgraded India and told the world that it expects a Nifty target of 7,600 for 2014.

When you hear this, you think that Goldman Sachs drives our market. I think they largely pick figures up from where the sun don’t shine. It has NO idea where markets will actually go, so let’s look at its past “estimates”.

By |March 18th, 2014|Categories: Goldman, Nifty|5 Comments

ATH: Index Peaks But How Many Index Stocks Are Close to All Time Highs?

While the Nifty is near its all time highs, it’s just an index of a bunch of stocks. How many of those are close to their all time highs?

We introduce the Capital Mind All Time High indicator (ATH) which maps this over time.

CAPM-ATH

These are the number of stocks within 5% of their all time highs. The indicator is built accounting for changes in the Nifty over time, so what you see is the set of stocks that form the Nifty at that date, which are within 5% of their all time highs.

Note: this is data of 12th March 2014.

As you can see the number of stocks close to all time highs peaked at 27 in October 2007, but the number started to fall as the Nifty went higher […]

By |March 14th, 2014|Categories: Nifty|1 Comment

Markets: Feb Moves +3%, but March Sees +4% Already

I’ve just realized I forgot to do the monthly move post for February. Not only has Feb been a good month for the markets with a 3% move, March till the 7th has done another 4%!

image

Interestingly, markets in March have been strong on either direction. While 1994, 2001 and 2008 saw very bad march moves of nearly double digit falls, we have seen 1999, 2009, 2010 and 2011 do nearly double digit rises. Which one will 2014 be?

Also, let’s look at the Sensex for larger moves.

image

By |March 8th, 2014|Categories: Nifty|Tags: |Comments Off on Markets: Feb Moves +3%, but March Sees +4% Already

Nifty At All Time High, Third Time Lucky?

Markets are at a new closing high. The Nifty ended on March 6 at 6401, which breaks through the last highs around this level, which were in 2008 and 2010.

image

(Click for larger picture)

The Nifty though seems much more reasonable this time on valuations, as we are at about 18 P/E versus 22+ on the last two occasions.

The 200 and 50 day moving averages are also looking upward sloping.

Are we going to get a real breakout this time? Third time lucky, they say, but then they’ll tell you that for the fourth, fifth and sixth time as well.

The fear of course is that we’ll retreat again from these levels. The answer to that lies in the question – are we really at a new high? The fact that […]

By |March 7th, 2014|Categories: Nifty|Tags: |Comments Off on Nifty At All Time High, Third Time Lucky?

The VIX Futures Contract: Too Big For Retail

We now have trades on the Volatility Index (VIX) futures. In a more detailed post to Capital Mind Premium, I spoke of how the VIX was constructed, and provided a background into Option Pricing. To summarize, one part of the option pricing calculation includes an estimation of volatility in the subsequent days to expiry.

The reason you pay “time value” to options is that there is a risk of the stock being volatile in the time to expiry. Call options suffer the risk of the stock going up beyond the strike price (for the seller of the option, which is a reward for the buyer). The seller prices this risk in the premium demanded for the option. A put seller, accordingly, prices the risk of the stock going down.

The VIX is a glorified average of these implied volatilities, except only on the Nifty, and normalized for 30 days (instead of the number of days […]

By |February 28th, 2014|Categories: Nifty, Options|3 Comments

Nifty Bids Adieu to JP and Ranbaxy, Adds TechM and United Spirits

The NSE has changed the constituents of the Nifty from March 28, 2014.

  • JP Associates is being replaced with Tech Mahindra
  • Ranbaxy is being replaced with United Spirits

This should in general be good news for the United Spirits and TechM stocks, and bad for Ranbaxy and JP. Why? Because Index funds will have to match the portfolio and buy/sell these stocks in that manner. But they have a month to switch over.

But time will tell, and a cursory glance of previous stock changes haven’t really gone down that way. And for good reason too – the amount of money in India in Index funds is not that much (only about 1,000 cr.).

Plus, the weights of Ranbaxy and JP Associates add up to 0.5% (about 0.25% each), which is tiny. (That’s Rs. 5 crore in total, on AUM of 1,000 cr.) These stocks […]

By |February 28th, 2014|Categories: Nifty|Comments Off on Nifty Bids Adieu to JP and Ranbaxy, Adds TechM and United Spirits

Great P/E but Anaemic EPS Growth on the Nifty

Nifty’s Earnings Per Share has now risen to 348, derived from it’s P/E ratio of 17.59. This gives us an EPS growth of just 7.9% over the previous year, showing you a massive difference between valuations and reality.

Nifty P/E versus EPS growth

Even if we assume that P/E is for the future and EPS growth is of the past, then if we offset the P/E chart one year back (that is, compare the P/E of 2013 with the actual growth we saw in 2014) we get a picture of stark differences: (We compare the “normalized” P/E versus EPS growth).

Normalized Nifty P/E versus EPS growth […]

By |February 19th, 2014|Categories: Nifty|Tags: |2 Comments

Nifty Protects 200 DMA, EPS Growth At a Miserable 6%

The Nifty bounced off it’s 200 day moving average to end marginally above the 6,000 mark, a level it hasn’t closed below since 22 Nov 2013, which was more than 2 months ago. The recent new high was on 9 December 2013, after which the market has fallen over 5%.

image

(Click for a larger picture)

The 200 DMA is at 5976 and remains a strong support level. The market is about 14% above the August 2013 lows.

The P/E ratio remains at 17, though it took a little dip in October to December due to the rebalancing of weights. At Rs. 345 per share, the earnings per share of the Nifty has grown just 6% from the same day the last year. There are hardly any results left to come, and this […]

By |February 6th, 2014|Categories: Nifty|Tags: |Comments Off on Nifty Protects 200 DMA, EPS Growth At a Miserable 6%

Monthly Nifty Move of -3.4% Worst In Six Months

The markets start the year badly as January brings with it a -3.4% return on the Nifty, the worst month since August 2013.

 

imageYes, there was a run in the “Fragile Five” currencies, but the rupee only fell 1% in the month. FIIs did exit some debt positions and towards the end of the month, equity position as well.

Look also at the returns in the Sensex:

image Feb is usually a very good month for the markets, but will it please investors this time, with elections around the corner and no full-budget? Let’s see.

By |February 2nd, 2014|Categories: ChartOfTheDay, Nifty|Tags: , |Comments Off on Monthly Nifty Move of -3.4% Worst In Six Months

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?

image

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