Domestic Sentiment Subsides....Global Markets Key Now

Mid-Cap and Small Caps have corrected significantly since the below 2 posts were made.
http://speculationanart.blogspot.in/2013/01/nifty-mid-cap-volumes-tell-different.html (Date - 7 Jan 2013) 
http://speculationanart.blogspot.in/2013/01/small-mid-cap-froth-adds-to-nifty-worry.html (Date - 9 Jan 2013)


Mid-Cap (NSE Mid Cap 50 Index) is down 5.7% and NSE Small Cap is down 10% since 7th Jan 2013. Primary reason for calling for caution which was discussed in those posts was as follow....

• Once a price trend has been in place, spike in volumes typically indicates end of trend (short/medium or long term). On other hand, spike in volumes in flat to downward market is typically sign of new trend.

• Typically prior to peaks volumes are much lower with sudden burst in volumes. Post peaks volumes again tappers off and comes back to pre peak levels.

The above points can help significantly in identifying intermediate tops. Let see what has happened to volumes and price action since then.

1) Both NSE Mid Cap and NSE Small cap peaked with burst in volumes. Small cap peaked in Dec 2012 while Mid Cap peaked in Jan in terms of daily average volumes. Please refer previous posts to compare how were both indices were positioned then. (Jan 7 and Jan 9 2013)

2) Previous 2 posts clearly indicated behavior of "all in" among local participants and since then price behavior has deteriorated.

Having seen deterioration in small and mid cap in terms of price, we will also see how EXPERT views are positioned NOW compared to start of December 2012 and January 2013. As we have seen through previous post (http://speculationanart.blogspot.in/2013/01/market-turning-points-and-expert-views.html), expert views are one of the greatest contrarion indicator. 3 year old kid has higher probability to succeed in markets than these experts...simply because his probability to succeed is 50% while experts probability to fail is close to 100%. Experts turning out to be right is BLACK SWAN event. 

Before we get into summary of expert views....we need to understand price behavior of Nifty prior to collection of those views. This is because expert views are primarily derived recent price action.

Nifty Price Action during Sep-Nov 2012

1) QE week (Quantitative Easing announcement week) accounted for 6.3% of move in Nifty in Sep 2012.

EXPERT HELP....
Expert Views @ the start of December 2012 (1st week of December 2012)

1. See Nifty at 6350 if govt wins FDI vote: Ajay Srivastava (CNBC...3rd Dec 2012)
2. Nifty may end December F&O series at 6070-6120: IIFL (CNBC...3rd Dec 2012)
3. Mkt holds upside surprise; FIIs go long: PhillipCapital (CNBC....4th Dec 2012)
4. See strong up trending mkt; go long: Sudarshan Sukhani (CNBC....4th Dec 2012)
5. See Bank Nifty hitting lifetime highs before Nifty: JM Fin (CNBC....5th Dec 2012)
6. Market on a roll; Nifty may hit previous high soon: Experts (CNBC....5th Dec 2012)
7. Brace for 21000, don't wait for correction: Ramesh Damani (CNBC....7th Dec 2012)
8. Sensex may see 22000 by March 2013: Sanju Verma (CNBC....7th Dec 2012)

Since Most experts were bullish and Dec 2012 received 3rd Highest Monthly FII inflow ever, NIFTY ZOOMED by 0.4%. 

Expert Views @ the start of December 2012 (1st week of Jan 2013)

1. US, Europe sideshows; domestic boom to rule 2013: PN Vijay (CNBC....1st Jan 2013)
2. Nifty on verge of breakout; go long above 5920: Sukhani (CNBC....1st Jan 2013)
3. See Nifty at 7500 if 6300 breached decisively: Darashaw (CNBC....1st Jan 2013)
4. Mkt to remain buoyant for first quarter of 2013: Edelweiss (CNBC....1st Jan 2013)
5. Nifty to make new highs after taking out 6000: Baliga (CNBC....3rd Jan 2013)
6. Mkt trend upwards; buy on dips, don't short sell: Sukhani (CNBC....4th Jan 2013)
7. Mkt set-up strong; resistance for Nifty at 6080: Manghnan (CNBC....4th Jan 2013)

Since Sky was the limit for experts and poured in Rs 22k cr, Nifty exploded by 2.2% outperforming most global markets which were up anywhere between 5-9%. 

Nifty started 2013 @ 5905 and 8th Feb 2013 close was 5904....FII inflow close to Rs 55kcr in 2013 (I have no idea if FII inflow is anyway linked to Nifty movement...but I am carrying out general practice here)...Since Sep 2012 end (Month of Nifty break-out), Nifty is up massive 3.5% and FII inflow of close to Rs 75kcr. NSE Mid Cap Index is down 1.1%  and NSE Small Cap Index is up 1.5% since Sep 2012 end.  Such performance should logically result in some sort of tired feeling among experts who drives only with rear-view mirror. 

Expert Views Now....

1. Mkt inching to 5780-5800, use rallies to short: Sukhani (CNBC....8th Feb 2013)
2. See mkt at 5840-5850; cautious of SBI : Ambareesh Baliga (CNBC....8th Feb 2013)
3. Buy Infosys, short Nifty for good hedge: ICICI Direct (CNBC....8th Feb 2013)
4. Nifty can decline to 5762-5750 in 2 wks: Mitesh Thacker (ET Now...9th Feb 2013)
5. Nifty gives bulls have a few things to worry about (www.firstpost.com......9th Feb 2013)

The above clearly indicates local factors are clearly tired...Reform push and all other "sentimentally" positive news have failed to show in Nifty performance. Worse part is Nifty has significantly unperformed most global markets since last 2-3 months. SO IN TERMS OF SENTIMENT, LOCAL SENTIMENTS ARE DOWN SIGNIFICANTLY WHICH SHOULD LIMIT DOWNSIDE IN NIFTY....ONLY THING THAT CAN CREATE FURTHER DOWNSIDE IN MARKET IS GLOBAL FACTORS...