In the last two months the Indian Indices have underperformed the global exchanges. When Dow and FTSE have returned more than 8% in the last one month, Nifty has just crawled by 2.4%. The up move was grindingly slow, sans volatility. Typically, markets have good swings pre and post earnings. This earnings season (.ie June – July for Q1) was quite against the normal. Surprising again, given the fact that the earnings have not been spectacular. Infact many Nifty 50 companies missed street expectations and yet no major movements in the markets.
In the past six months Nifty has been caught in a tight range from 4800 to 5300. The range has just got narrowed to 5200 to 5400 and now seems to be caught in a much smaller range of 5400 – 5500. Thanks to the slowing down, the Volatility Index (VIX) has come down to 17.3, the lowest level, since its inception from March 2007 (see chart below). Option prices are so depressed even the shorters risk reward ratio is just not worth it.
(The left axis represents The VIX and the right axis represents the Nifty)
While it does seem that traders and operators are having a very bad time unable to move anything, there is a different picture emerging in the FII(Foreign Institutions) and DII(Domestic Institutions) trade statistics. In the past 2 months FII's have bought a net of Rs.18,000 crores($4.5 Bn) worth stocks while DII's have sold close to 12,000 crores($2.5 Bn) net.
(The left axis represents amount is Rs. Crores of Buy /Sell and the right axis represents Nifty)
As can be seen from the Buy sell statistics, Domestic institutions are just not comfortable with the valuations, but FII's are loving India. While the love is purely business, I am not sure what their positions are on the Derivative segment (Believe its Short:P)
At a time when earnings have not kept pace with expectations, we are hitting 52 week highs and on a forward PE basis we are the costliest among major developed and emerging markets. Even China is about 2x lower than us. (India at about 16x-17x and China about 14x-15x). The Global scenario is also not great, with doubts of Double Dip and Sovereign Debt/Credit Risk still looming large.
So all you traders pick up your positions before the Volts start moving, I believe there is a nice little BIG short, just round the corner.
-Vishnu
For all you bulls – I do believe in the long term growth story of India, but for Gods sake let the bears have some fun.
2 comments:
Bears have already taken their positions. It would be nice if you include trendline data as that would have added more technical and logical teeth to the article. It would be interesting to watch where Fii's park their brought in funds. Historically also Fii's have only managed to push the index up and our local players have been profiting more than these Fii's. Hope this ensuing correction touches 10% mark typcical to what we had in the past.
Yes u r right
Still remember during deepavali
market was at 5375 & from there it went down to 4475 in 5 to 6 trading sessions may be 4750 now
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