OI in Nifty futures hovering around 27 million i.e. increasing with falls; some short-covering seen today but Banknifty is not managing to step up and this will limit the upside on Nifty significantly. 4550 on Nifty spot and 7800 on BNF spot was expected but have to concede that was expecting some upside before these levels are retested but the weakness from Friday continued [one must note that from Friday morning's high of 4800+, Nifty drifted to 4550 in 1.5 sessions flat and BNF melted over 500 points from Friday's high!]
Longs and shorts both apparently rolling over positions as far as the strong hands are concerned. Weak hands have no business in this market as hot money will chop them off regardless of which side of the trend they are in. By Thursday or Friday until Dec expiry, we should not be surprised to see a sudden surge in OI to 35-40 million regardless of trend. This is the 2nd consecutive close below 4720 and that keeps the option of retesting 4460 as a bare minimum in the near term. CNXIT still showing resilience at the back of a weak rupee but this segment will see significant corrections in the next 6 to 8 weeks. [CNXIT tends to lag by 3 months on either direction as far as Nifty is concerned IMHO]
VIX excessively high at 31 in the morning session and just marginally below 31 in the last hour with short-covering. Risk Reward ratio has tilted in favor of Longs but buying should be intiated in a staggered fashion and hedges are important. Still looking for a Santa rally to 4994 on the back of short-covering but unless BNF comes to 8200 levels, 4994 on Nifty seems a bit stretched. Excessive shorts in BNF and BNF component stocks; outlook for SBI and ICICI Bank subdued as indicated last week [and today's melt-down on Axis Bank is another shocker]
Food For Thought
From an investment perspective, SIP in NiftyBees and BankBees recommended with a 2-3 year horizon. It is better to deploy some of your funds as a self governed SIP rather than SIP through a myriad of Mutual Funds. On a Mutual Fund level, I am personally only in favor of HDFC Top 200 and SBI Magnum Emerging Market schemes for a small portion. Gold ETFs are out of question now as there is deep corrections pending in Gold and Silver will continue drifting lower to sub-USD 25 / ounce levels but even there one should not rush to acquire this high beta metal as the Roller is camoflauging the true value of Silver in INR.
Miscellaneous Wonders
There is an interesting trend to note from a mass psychology perspective of EW on market trend anticipations. [Statistical Disclaimer: Correlation can be established but not Causality] Whenever the ultra-rich start deploying funds in luxury items like yatches, excessive investments in real estate and alternative investments like art, stamps and high end excesses, it is supposedly a sign of troubles to come. I had ignored this hypothesis in my EW sojourn but some findings recently on Indian markets are leading me to pay attention to this. Kingfisher group went out excessively for yatches, sports teams and real estate in/out of India - results can be seen on the ticker. Airtel's Sunil Mittal, DLF's Mr Singh went out of the way to acquire some real estate in London - results are on the ticker!!!
The Capital Asset Pricing Model has seen some changes in the last 8 to 10 years and increasingly, markets do not reward diversification by conglomerates. The greater diversification done by a conglomerate, the greater is the negative impact on the components of the conglomerate with a longer term horizon. Returns on M&As by such conglomerates have yielded a median of -0.3% increase in shareholder value of the conglomerates and the range is anywhere between -50% to +20% i.e. markets perceive diversification as 'di-worsification' of the portfolio. I have been fortunate to be a part of studies on this and whilst I cannot spell out details on this forum, those who wish to study this case can contact Professor Laurence Capron of INSEAD who has vetted this paper with her own extensive research as well. Professor Capron has 2 decades of experience in M&A areas from a Corporate Strategy perspective, has an MBA from Wharton, PhD from Harvard and is a Senior Professor in this area in INSEAD's Fontainebleau campus.
I bring out this aspect today for the common investors in India to resist the tempation in blindly picking up diversified units of conglomerates. Bharti ventured into unrelated areas like Retail, Shipping and the charts say it all. Reliance in the end is valued for petrochem and the other counters will eventually be badgered. GMR, GVK will be valued for air terminal facilities but get badgered for power and road related projects. So far, in my limited experience with markets, only Tatas and LnT have managed to keep most of their portfolios intact despite diversified businesses [ignoring cyclical ups and downs] and one of the key reasons has been dividends and bonuses. In the long term, this is what markets reward on a fundamental basis and one should be very careful whilst creating a diversified portfolio. Buying units of indices automatically gives a lot of diversification and takes care of a lot of systemic risk of your portfolio.
To summarize today's verbose post [a catching up affair for missing out over the weekend]
No expert is required for creating a balanced portfolio of your hard earned money.
30% in FDs / FMP units that ensures liquidity and risk free yields
30% to 50% in Indices like NiftyBees, BankBees, HangSengBees [GoldBees as well when the prices are low]
The balance, in top notch counters as a majority with just some exposure to midcaps and smallcaps as they tend to appreciate fast in bull market conditions; however they also are the first to get badgered since their market capitalization is pretty low. Periodically review the portfolio and keep booking profits esp after 1 year when the Capital Gains Tax goes off. [Speculative Trading does not give that luxury]
Investment and Portfolio management is not rocket science; it is in fact very simple and a good hedge against the CPI inflation of 20% YoY [I don't care about the government statistic on inflation ever which is on a WPI level on a basket of goods that was valid in 1950s!]
Longs and shorts both apparently rolling over positions as far as the strong hands are concerned. Weak hands have no business in this market as hot money will chop them off regardless of which side of the trend they are in. By Thursday or Friday until Dec expiry, we should not be surprised to see a sudden surge in OI to 35-40 million regardless of trend. This is the 2nd consecutive close below 4720 and that keeps the option of retesting 4460 as a bare minimum in the near term. CNXIT still showing resilience at the back of a weak rupee but this segment will see significant corrections in the next 6 to 8 weeks. [CNXIT tends to lag by 3 months on either direction as far as Nifty is concerned IMHO]
VIX excessively high at 31 in the morning session and just marginally below 31 in the last hour with short-covering. Risk Reward ratio has tilted in favor of Longs but buying should be intiated in a staggered fashion and hedges are important. Still looking for a Santa rally to 4994 on the back of short-covering but unless BNF comes to 8200 levels, 4994 on Nifty seems a bit stretched. Excessive shorts in BNF and BNF component stocks; outlook for SBI and ICICI Bank subdued as indicated last week [and today's melt-down on Axis Bank is another shocker]
Food For Thought
From an investment perspective, SIP in NiftyBees and BankBees recommended with a 2-3 year horizon. It is better to deploy some of your funds as a self governed SIP rather than SIP through a myriad of Mutual Funds. On a Mutual Fund level, I am personally only in favor of HDFC Top 200 and SBI Magnum Emerging Market schemes for a small portion. Gold ETFs are out of question now as there is deep corrections pending in Gold and Silver will continue drifting lower to sub-USD 25 / ounce levels but even there one should not rush to acquire this high beta metal as the Roller is camoflauging the true value of Silver in INR.
Miscellaneous Wonders
There is an interesting trend to note from a mass psychology perspective of EW on market trend anticipations. [Statistical Disclaimer: Correlation can be established but not Causality] Whenever the ultra-rich start deploying funds in luxury items like yatches, excessive investments in real estate and alternative investments like art, stamps and high end excesses, it is supposedly a sign of troubles to come. I had ignored this hypothesis in my EW sojourn but some findings recently on Indian markets are leading me to pay attention to this. Kingfisher group went out excessively for yatches, sports teams and real estate in/out of India - results can be seen on the ticker. Airtel's Sunil Mittal, DLF's Mr Singh went out of the way to acquire some real estate in London - results are on the ticker!!!
The Capital Asset Pricing Model has seen some changes in the last 8 to 10 years and increasingly, markets do not reward diversification by conglomerates. The greater diversification done by a conglomerate, the greater is the negative impact on the components of the conglomerate with a longer term horizon. Returns on M&As by such conglomerates have yielded a median of -0.3% increase in shareholder value of the conglomerates and the range is anywhere between -50% to +20% i.e. markets perceive diversification as 'di-worsification' of the portfolio. I have been fortunate to be a part of studies on this and whilst I cannot spell out details on this forum, those who wish to study this case can contact Professor Laurence Capron of INSEAD who has vetted this paper with her own extensive research as well. Professor Capron has 2 decades of experience in M&A areas from a Corporate Strategy perspective, has an MBA from Wharton, PhD from Harvard and is a Senior Professor in this area in INSEAD's Fontainebleau campus.
I bring out this aspect today for the common investors in India to resist the tempation in blindly picking up diversified units of conglomerates. Bharti ventured into unrelated areas like Retail, Shipping and the charts say it all. Reliance in the end is valued for petrochem and the other counters will eventually be badgered. GMR, GVK will be valued for air terminal facilities but get badgered for power and road related projects. So far, in my limited experience with markets, only Tatas and LnT have managed to keep most of their portfolios intact despite diversified businesses [ignoring cyclical ups and downs] and one of the key reasons has been dividends and bonuses. In the long term, this is what markets reward on a fundamental basis and one should be very careful whilst creating a diversified portfolio. Buying units of indices automatically gives a lot of diversification and takes care of a lot of systemic risk of your portfolio.
To summarize today's verbose post [a catching up affair for missing out over the weekend]
No expert is required for creating a balanced portfolio of your hard earned money.
30% in FDs / FMP units that ensures liquidity and risk free yields
30% to 50% in Indices like NiftyBees, BankBees, HangSengBees [GoldBees as well when the prices are low]
The balance, in top notch counters as a majority with just some exposure to midcaps and smallcaps as they tend to appreciate fast in bull market conditions; however they also are the first to get badgered since their market capitalization is pretty low. Periodically review the portfolio and keep booking profits esp after 1 year when the Capital Gains Tax goes off. [Speculative Trading does not give that luxury]
Investment and Portfolio management is not rocket science; it is in fact very simple and a good hedge against the CPI inflation of 20% YoY [I don't care about the government statistic on inflation ever which is on a WPI level on a basket of goods that was valid in 1950s!]
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