O Ashuji...
As discussed in previous blog, Indian markets have become one of the most broken market in the world purely because of wild swings across asset markets - equity & currency. Living up as a broken market, Nifty erased almost all loses of August in just last 3 days. Rally was led by beaten down sectors and stocks (Banks mainly). When capital is confused (as it is now in Indian market context), moves will be magnified. Lets understand nature of fall and bounce of last few days to get some sense on the market.
Bank Nifty led the fall from June 2013 was largely led by Banks...
What does massive broad market damage (fore)tell about
Indian Banking Stocks.....?? (Blog Dated 7th April 2013)
http://speculationanart.blogspot.in/2013/04/what-does-massive-broad-market-damage.htmlFew points on nature of fall in banking stocks...
1) Since June 2013 till 28th August Lows, Bank Nifty had fallen 34% (61 trading days). Such intense & compressed fall typically happens during crisis and crisis rarely lasts for 3-4 months.
2) Bank Nifty recorded second highest turnover on 5th September, 2013 at Rs 50bn (Bank Nifty was up 9%+ on that day, post RBI measures). Highest being Rs 61bn on 19th May (next day of that famous 20% circuit day for index)
3) Accelerated fall in quality names like HDFC, HDFC Bank during July-August had all signs of capitulation in bank nifty. However, I strongly believe that such intense fall are signs of crisis and crisis don't get over in few months. Sharp bounce from recent lows is largely due to extreme negative sentiment, extreme oversold levels coupled with some positive steps from RBI. All this ensured a sharp bounce back.
Sharp and nature of bounce indicates, Nifty lows are not in place....
Nifty Stocks Performance (Sep 2013 and 2013) (%)
1) Nature of bounce clearly shows that rally is being largely led by beaten down stocks. Compare top gainers in Sep (so far) with Top Losers in 2013...
2) Beaten down stocks (largely banking stocks) have led September sharp rally.
3) Trying to make sense of sharp bounce and falls will be meaningless because Indian markets are largely broken. Thus we can again have very sharp fall over coming weeks.
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