Comparative Analysis on Why Indian Market May Outperform Global Indices

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.

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 %

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