Thought for
the day
“October. This is one of the peculiarly dangerous months to
speculate in stocks in. The others are July, January, September, April,
November, May, March, June, December, August, and February.”
-
Mark
Twain (American, 1835-1910)
Word of the
day
Dither (v)
To act irresolutely; vacillate.
(Source: Dictionary.com)
Shri Nārada Uvāca
Why Rahul Gandhi is helping Narendra Modi’s cause?
Reality check @Nifty 6200 - V
Market internals
In past five years the capital market in India has mostly
failed in its primary function, viz., facilitating entrepreneurs in raising
risk capital from investors. The character of the market has thus got
constricted to a trading platform.
In that also, the liquidity has remained extremely thin.
Over 95% of daily volume has got concentrated in top 50 stocks. The average
daily cash turnover is almost half of 2007.
More importantly, the household investors who historically
supplied long term stable money to the capital markets have been gradually
losing interest. The direct retail participation in equity market, both
secondary and primary is at lowest level in more than a decade. Even in mutual
funds and equity linked insurance schemes they have been in gradually exiting.
In a survey conducted in March 2013 we discovered that the
shift of household investors away from listed equity is rather structural and
not likely to reverse in next 5-7years at the least. (See “Retail Conundrum” Part 1, Part II,
Part
III, Part IV).
Further, the constitution of market turnover has
dramatically changed in past five years.
Till 2007, most activity was concentrated in individual
stocks and stock futures. Average volatility was high and therefore arbitrage
premiums were good. The market manipulation at Index level was difficult and
less rewarding.
However, presently, over 80% of average daily reported
turnover is in Nifty options only. The top 15 liquid Nifty stocks account for
over 95% of Nifty movement. The Index level manipulation is therefore easy and
rewarding, whereas arbitrage premiums are unattractive as volatility is
persistently low.
The equity investing is thus virtually degenerating into
trading and gambling.
Building a case for secular bull market thus is unfathomable
and futile.
Market technicals
We have witnessed a strong bear market rally in past 8weeks.
This rally though not as big, ferocious and wide spread as July 2007 – January
2008 bear market rally, but is similar in structure and design.
There are early indications that the rally might be losing
momentum already. On daily charts MACD, RSI and Oscillators are all about to
turn bearish.
Whereas on monthly and quarterly charts Nifty is not showing
any sign of breaking out of its long term 5year range of 5200 – 6300 on regular
basis. We may though continue to see occasional violations of both the side.
For example, the reverse head and shoulder pattern on weekly chart suggests
that in next 15months we might even test 6700
on the upside.
In immediate term, Nifty has small support at 5910 (50days
EMA). A break below this level shall take Nifty back to 5480-5790 range in no
time.
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