Thought for the day
Nifty:
Fear and greed indicator peaking
The outperformance of BSE small cap Index during past 24months is not as sharp as it was during 2006-08, but if we adjust it for slower economic growth this time and substantially poorer corporate earnings performance, the outperformance might not only look sharper but ominous also.
I therefore sincerely believe that it is reasonable to raise guards against a potential sharp correction in broader markets in next few months.
"If you want to be
happy, be."
Leo Tolstoy (Russian, 1828-1910)
Word for the day
Gormandize (v)
To eat greedily or ravenously.
(Source: Dictionary.com)
Malice towards none
Besides PK, Arun Jaitely, Amit Shah, Satish Mishra, Jairam
Ramesh, et. al. have all enjoyed the status of master election strategists in
past one decade.
First random thought this morning
To fulfill his poll promise, Nitish Kumar has expressed his
intention to ban consumption of alcohol in the state of Bihar from next fiscal
year. Gujarat has prohibition in force since the formation of the State in
1960. Nagaland enforced complete prohibition in 1989. Manipur and Lakshdweep
have enforced prohibition in select parts of the respective states. Kerala
government has also proposed similar law. Andhra Pradesh, Tamil Nadu, Mizoram
& Haryana have implemented but later repealed prohibition laws.
It's a noble thought. I hope Bihar government will learn from the
mistakes of other states and enforce an effective law. To test the waters he
should prohibit GA legislatures and all seniors officers of the State from
consuming alcohol with immediate effect.
Nifty:
Fear and greed indicator peaking
Historically, one of the most successful, though intuitive
indicator of greed overtaking the fear in market is outperformance of small cap
stocks over large cap stocks. On this parameter market is ripe for a major
correction.
In past an outperformance level of 25-35%, in a given period has
marked the cycle peak for the market. The correction thereafter have been
sharp, painful and very broad based. In one year post peaking, the broader
market corrected much more sharply as compared the benchmark indices.
In last instance the outperformance peaked in January 2008 and broader
markets corrected over 80% in the following one year as compared to ~60% for
the benchmark indices.
The outperformance of BSE small cap Index during past 24months is not as sharp as it was during 2006-08, but if we adjust it for slower economic growth this time and substantially poorer corporate earnings performance, the outperformance might not only look sharper but ominous also.
I therefore sincerely believe that it is reasonable to raise guards against a potential sharp correction in broader markets in next few months.
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