Nifty Index Futures Selling at Historic Highs....

Danger is Real....Fear is Choice !!!
O Ashuji....

India may be one of the few markets in the world, where large part of the time by Experts and Fund Managers is spent on "relevant" things like what is Finance Minister thinking, What will Ben Bernanke talk, Lets Hope Government does reform (its been favorite topic since 1991), Lets Hope RBI cuts interest rates, Who Will Form the Government....If we one listens to these Experts/Fund Mangers, one will have to concentrate hard to remember that these guys belong to Investment Management Industry. If a novice misses introduction part to these Experts/Fund Managers, then he will fail to differentiate between Anna Hazare's Hope and these experts/Fund Managers Hope. Opinions are given more importance than DATA.

Let DATA talk....

Index Futures and Options Volumes picked up hugely post 2009. Daily Average Turnover in Futures & Options markets have grown 2-3x since 2009. Hence, data for analysis is considered since 2010.


FII Index Futures selling (First 11 Trading Days of Month) (Rs cr)

Highest FII Index Futures Selling Since 2010

Conclusion

Except May 2011, which had small 1.5% move, other 2 months November 2010 and November 2012, had bigger moves over remaining days to expiry. 

June 2013, so far has massive Rs 79bn of FII selling on Index futures. This month, FIIs have sold on Index Futures on 10 out of 11 trading days. 

From Contrarian point of view such heavy selling on Index Futures could be positive. But if its indicative of coming Cash selling then downside could be serious. Expect Bigger Moves.....EXPERTS WILL HAVE REASONING FOR BOTH MOVES THOUGH...

Japan Trade has a long....very long way to go....

When monetary experiment of historic proportions are undertaken, impact lasts far longer than most realize...
O Ashuji...

Volatility usually occurs at inflection points in asset markets...
O Ashuji

Before getting into, how historic monetary policy has been (which has been discussed by most experts), lets have a look at price behavior of Nikkei 225. Nikkei's major move began from November 2012, hence price move is considered from that period.

Nikkei's Movement (%)

Large part of the Nikkei's move came before actual policy announcement, since present day central bankers believes in transparent communication policy.

Post Policy announcement, Nikkei is up just 7%, though recent high was up 24% from policy announcement.

If policy was historic in terms of quantum as we shall see, move is likely to last longer in terms of duration. It is unlikely to get over within couple of months.

Nikkei's daily % moves since November 2012

One can observe gradual increase in larger moves aka volatility. 

Volatility has largely increased post policy announcement. 

In Last 8 trading session, Nikkei had move >3%, 4 times. All of them were negative and 2 were greater than 5%. This is heavy clustering of big moves. Clustering of Volatility would imply, big moves are likely to continue and given the fact that all moves have been on downside, probability of big positive moves is higher. 


Putting Monstrous Monetary Experiment in Some Context....

Bank of Japan (BoJ) double Japan’s monetary base from Y135 trillion ($US1.43 trillion) to Y270 trillion in two years. This will be achieved by stepped-up purchases of long-term government bonds, lifting the average maturity of its holdings from three to seven years.

The BoJ will expand its balance sheet by the equivalent of 1 percent of gross domestic product (GDP) every month for the remainder of this year and by 1.1 percent per month in 2014. This is around double the rate of expansion of the US Federal Reserve’s holdings, which are growing by about 0.54 percent of GDP each month through the US Fed’s quantitative easing program.

"The Bank of Japan is buying assets at roughly 75 percent of the rate of the U.S. Fed, on an economy that's one-third the size of the U.S." - Kyle Bass, Hayman Capital. 

I believe Kyle Bass is one of best in terms of getting bigger picture of Japan. One may or may not agree to his call but statistics are irrefutable. For more on Japan from Kyle Bass, please follow the link http://www.youtube.com/watch?v=7kFcDKBpdII

 Conclusion

Given the massive and historic nature of monetary experiment undertaken by BoJ , Nikkei's move has a long way to go. Life of such massive policy push is likely to be few months if not few quarters. Understanding fundamental implication of a Ponzi scheme is meaningless. 

Nature of correction within couple of months of policy announcement will ensure, up move has long way to go. Recent correction is clearing extremely over crowded trade since policy announced in April, 2013. 

Business Channels Taglines/Punchlines and Social Mood of Investors

Business Channels reflects social mood of investors and are great contrarian indicator....
O Ashuji

Investing/Trading is lot about timing as about sizing of bet. One of the very powerful tool which can help long term timing is social mood of investors/traders in market. One of the better way to capture social mood is to gauge mood of financial comedians on business channels and the channel itself. Tagline/Punchline of these business channels is either message to investors or captures mood of investors. CNBC TV18 is one of the popular business channel in India. For long time it used to to run "Profit from it" as tagline/punchline but then Indian Investors/Traders have been only dreaming profits since 2010. I have used 2010 as starting point for dreamers because 2008 was nightmare and 2009, large part of the gains were over before dreamers could wake up. Since 2010, Nifty has risen by 14% in rupee terms while in dollar terms its negative because rupee has depreciated by 21%. Also, Since 2010 till date, Nifty could be one of the most ranged market. 

Nifty Range (% of time spent in range)

Since Jan 2013 end, CNBC has started new "communication campaign" ...titled "HELLO DREAMERS"

CNBC TV18’s “Hello Dreamers” campaign to inspire people who dare to dream big

CNBC TV18 has just announced the launch of a new corporate communication campaign, called Hello Dreamers, which aspire to be a motivation to anyone with a business dream.

CNBC TV18 Chief Executive Anil Uniyal said the campaign, which has been created by Contract Advertising, would reach out to anyone with a dream to try something new, take an unexplored path or to shine at what he/she are currently doing.

Speaking about the campaign, Uniyal said, "The campaign thought stems from the TV18 philosophy of having dared to dream big. This fearlessness to dream big and act on those dreams with conviction has made CNBC-TV18 a world class service."

According to Uniyal, the news channel's new campaign has a two-fold objective: to restate the channel's leadership and bearing with existing constituencies of viewers and secondly, to found relevance with new audiences as a brand that helps them in realizing their goals.

The news channel claims that its new Hello Dreamers campaign is a clarion call that invites people to rise above the depressing realities of the every day environment.

The Hello Dreamers campaign is being launched in a number of major Indian cities, including New Delhi, Mumbai, Kolkata, Bangalore and Ahmedabad, across various platform such as TV, radio, print and social media.

(www.topnews.in)

CNBC TV18 Taglines

"Profit From It" (2000—2008)

"The World Leader in Business News" (2004—2008)

"First in Business Worldwide" (2008—present)

(Source - Wikipedia)

Mood tends to peak when it is widely discussed in media, be it euphoria or pessimism. When taglines/punchlines are trying address gloomy mood of the investors, it is likely that mood has been captured into the stock prices (Though not the only criteria but very important criteria). Given the ranged market, India has had since 2010 (3.5 years), there is high possibility that Nifty could be on verge of a very big move.