A post after quite a time,
This time around we will discuss on
how markets are poised to move from here and how we have done so far using a
different parameter
While we wander around all time highs
how are our markets shaping up to move from here? Performance is usually
measured in absolute terms. That typically means what is the
absolute growth we have seen so far.
Which is a near 0% growth since the
market tested the highs in 2010. Another refined way of measuring performance
is on relative terms.
In relative terms it will be
interesting to see how badly have we done against the developed economies? we
have underperformed the developed markets ( for comparison we treat DJIA and
S&P as reference indices)
Here is a chart to depict the
magnitude of the underperformance. One chart as usual is worth many words.
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| NIFTY v/s DOWJONES RELATIVE ANALYSIS |
While US markets have moved 40% since
2010 we have just reclaimed the top (0%).
Now since the degree of deviation is
significant, this increases the chance that we will close this gap in the near
future. This is a reason to believe that we may look to outperform the global
markets in the near future?
This has also been confirmed with the
short term move? Now have a quick look at the last two months data
point. Since the last two months we have moved 15% on the upside
while Dow has moved about 4.5 %
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| NIFTY v/s DOWJONES v/s S&P: short term comparison |
Note this just means we are likely to
outperform. Which means that in case we are likely to go up more
than the global markets and when markets correct we are likely to go down less
in percentage terms.
How to use this as an opportunity:
Yes the analysis is fine, but how do
I capitalize on this.? Well there are a more than few ways to do so:
1. Global futures specially Dow jones and FTSE are traded in NSE
and can be used as a pair trading opportunity with our index( that is short in
Dow Jones and Long in NIFTY)
2. Similarly there are mutual funds which offer investing
opportunities both in global markets and NIFTY ETF. If one is long on the
former it may be a good time to switch into NIFTY ETF’s
3. For those who want to stay to our markets, one can bet on
relative upside and start picking stocks in a mixed manner. By mixed I mean
pick up partly sectoral stocks that have outperformed since 2010 and pick up
sectoral stocks that have performed mildly or underperformed since then
