Investment or Trading in the markets at High levels. Comparative Analysis & Low Risk ideas

In our last blog post we mentioned that Indian Indices are likely to relatively outperform the global indices and also shared some trading/ investing ideas to leverage this opportunity with lower risks

Here is a quick recap of the potential options to capture this opportunity  versus the global indices:

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

- See more at: http://www.powertrades.blogspot.in/#sthash.tnukRceY.dpuf

We received many feedback on this and expectedly lot of you want to try out option 3 ( that is keeping investment positions in the indian equity markets with a mix of opportunities

To take it from there we present here a comparative analysis of the various sectoral indices within Nifty.

NIFTY Sectoral Indices- Comparative Analysis

We have considered the following indices:

·         BANKNIFTY (NSE BANK)

·         CNXIT ( IT Stock indices)

·         CNX100 ( Top 100 CNX stocks)

·         MIDCAP Index (CRSMID)

The graph below presents how the indices have done against each other since the highs of 2010 was made.

It is clearly divided into three sections:

·         Outperformance: CNXIT

·         Flat performance: CNX100 & NIFTY

·         Underperformance: CNXMIDCAP & NSEBANK

Potential strategies in equity investments:

1.     Balanced Traders can Keep a mix of stocks especially from the top 2, that is CNXIT,CNX100 and NSEBANK. This way in case of a downward consolidation CNXIT stocks will ensure that the portfolio selection does better overall and in case of outperformance BANKING stocks may outperform the benchmark index

2.     Selective stock picking of not more than 10-20% from the mid cap sector. Look out for midcap banking stocks.

3.     Aggressive traders/investors can look at stock picking exclusively from NSEBANK & CNX100