SIGNS OF FROTH IN SMALL CAP STOCKS
Few signs of worry from June 2012 low rally
1) Average daily turnover for Nifty stocks peaked in Sep 2012 and have gradually come down from those levels. Average daily turnover for Nifty was Rs 6500cr in Sep 2012, with Oct, Nov and Dec being Rs 5800cr, Rs 4800cr and Rs 5200cr respectively. For Jan 2013, so far it has been Rs 5000cr.
2) Average daily turnover for NSE Mid Cap and NSE Small caps have continued to rise since Sep 2012. With December 2012 being significantly higher than previous months. December is seasonally light month, hence easy to play around with small cap and mid cap. However volumes have risen sharply since sep 2012.
3) Avg daily turnover for NSE Mid cap stood at Rs 1863cr significantly higher than Rs 1229cr and very close to Rs 1941cr recorded during Feb 2012 peak. Just to show difference in volume in mid cap vis a vis Nifty - Nifty had average daily turnover of Rs 9000cr during Feb 2012, while this september 2012 (peak volume month) it stood at Rs 6500cr.
4) NSE Small cap is even more interesting. NSE Small cap volume data is available from April 2011. NSE Small cap surpassed its Feb 2012 peak in terms of shares traded during Dec 2012. while so far in Jan 2013, it has surpassed its Feb 2012 peak both in terms of Volume and Quantity.
SMALL CAPS LEAD MID CAPS AND MID CAPS LEAD LARGE CAPS IN TERMS OF VOLUME.....!!!
Such interest in small cap and mid cap typically comes once price move has already happened. I Selected few stocks from list of stocks hitting 52 week/all time highs.
Froth ???
1) Interestingly, 16 out of the above 26 stocks are NBFC.
2) Observe the sharp move in most of them post September 2012.
SIGNS OF TOP
Only thing missing for meaningful top is spike in Nifty volumes (though not necessary). If we were to have spike in Nifty volumes and then reversal, case for top will be strengthened significantly.
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