India Macro Strategy Part 1: Factors to consider

India has under performed for the first half of 2011. The performance was one of the lowest among the emerging markets inline with Egypt, Vietnam and Brazil. While Egypt and Vietnam has there own specific internal issues Brazil is in same set as of India. The problems plaguing India are Inflation, Investment slowdown, Inaction by policy makers.

We have been bullish on consumption stocks namely the FMCG for the first half. The rationale was to be in defensive sector as the first mid cycle slowdown hits the global economy.

Before forming strategy lets outline the major factors to consider:

1. QE3 or not?
2. Interest rates outlook for Emerging economies.
3. Will Fed hike the rates in 2H 2011?
4. The persistent European problem.
5. High levels of household debt and
6. Double dip or not....

All of the above issues were there in Jan 2011 and we are still having the same issues. Structurally noting has changed expect that QE2 has ended and fed has not indicating of any further QE measures at least by in name,

The same set of problems are still in the global economy.

Coming to India the main issues we need to consider are:

1. Inflation.... will this Genie ever get into the bottle
2. Investment slow down across the sectors.
3. Inaction by Govt. on policy formulation.
4. GDP Growth concerns

The policy inaction on number of fronts has been the main concern for the India. Recent corruption scandals has impacted the county's image a big way. FDI like Posco has been in limbo for a long long time.

These are the factors we will consider to arrive at strategy for this half.
We will explore in detail each of the above factors in next post.

India Sectoral Trend Weekly 6 May

The last two weeks have been tumultuous for the equity markets.

With the straight fall there has been a lot of change in the weekly sectoral trend for the markets.
The main points are:

1. The # of sectors on Sell / Lev Sell mode is 10 with CNX IT Sector in Lev Sell mode for last 2 weeks.

2. Nifty was in Neutral mode as of Friday 6th May.

3. The trend for 11 sectors is Neutral which is quite high indicating the ongoing sideways movement in many indices.

4. Broader market indices like BSE 500, BSE Small Cap, BSE Mid cap and  Nifty CNX 100 are in Neutral zone.

5. The cyclical index Metal, Realty, Cap Goods and IT are in bearish mode while the defensive sectors are in Neutral mode.

The above points clearly shows that the trend is towards accumulating the consumption stocks rather than being in Growth or High beta stocks.

This is inline with the earlier Macro call of Monsoon trade. See Post here.

The weekly color table:

India Sectoral Trend Weekly 21 Apr

Indian sectoral indices while remaining mostly in buy mode are showing signs of sideways move.

The indices average move last week was just 0.4% and prior week was -0.5% while the Nifty move 1.1% last week and -0.5% prior week.
The average move of last 2 weeks for broader market indices like BSE 500 is at 0.3%, Small cap at 0.6% and Nifty Mid cap was flat.

This shows that while that there was some traction in Nifty there is no clear sectoral leadership as of now which can take markets to new highs.

The weekly color is as follows:

The IT is still maintaining the Neutral color after the Infy's results shows broader strength is still present in the index.

The Auto and FMCG indices are clear winners and this could be a good monsoon macro trade.

India Sectoral Trend Weekly 1 Apr

Recovery across the sector with just only 5 in Sell mode and 12 in Buy mode. Nifty has also come to Buy mode.

This reinforces the view that stating in earlier posts that market is gonna rally after the Nifty Bullish divergence and VIX rise in tandem with Nifty.

The rise in beta indices like Realty and Infra has been with good volumes shows appetite for Indian stocks at low levels.

The broader market index BSE 500 has also come to Buy mode while the small cap index is still in Sell mode.

The IT index though is still in Neutral mode which shows that rally in more in the beaten up sectors.

The weekly color:

The breadth has improved a lot and that was evident in last weeks State of Market post.

India Sectoral Trend Weekly 25 Mar

Last week has changed a lot in the sectoral trend.
The week was a breakout from the range with Nifty moving up by 5%+ with CNX Realty and Bank Nifty up by 9% and 6% on weekly basis.

The major changes are as follows:

1. Nifty weekly mode has now come to Sell from Lev Sell mode. The index Lev Sell was for 8 weeks.
  The Lev Sell net change for the index was 2.5% which is very less for a Leverage mode. This shows that the major trend is bullish only. It is in the bullish trend that Lev Sell produces such small gains.

2. Banking and IT indices are back to Buy and Neutral mode. These two sectors are good bullish bets going ahead as they are outperforming the broader market.

3. The BSE 500 and BSE 200 indices also recovered to Sell mode indicating that there is recovery in broader market.

4. The recovery from Lev Sell to Sell shows that we have made the bottom for intermediate term.
   The color of Nifty weekly as of Monday open in Neutral.

The sectoral color:

India Sectoral Trend Weekly 18 Mar

The weekly sectoral trend is still on bearish mode. The no change in the trend shows the range trading.

Worth noting is the Sell is maintained in IT indices with last week CNX IT index getting sell of by ~3% on w-o-w basis.

Attached is the weekly trend.

India Sectoral Trend Weekly 11 Mar

India sectoral trend showed not much change from last week.

Most of the Sectors gave some of the gains of the last week.
The weekly candle in most was of Doji near the lows which indicates that there is some respite in selling coming at low levels.

Tech index is still relatively better placed then rest of the indices as it is only sector in Sell mode while others are in Lev Sell mode.

Here is the complete color:

India Sectoral Trend Weekly 4 Mar

Last Week all the sectoral indices rallied with Nifty itself up 4%. This was more of the Budget rally we witnessed.

Since the recovery more or less stalled at Feb highs indicates that the market trend is bearish.

The color of most of the sectors though still remains in Lev Sell or Sell mode.
Not a single sector is in Neutral or Buy mode.

The Bank Nifty and BSE Bank Index is now in Sell mode recovering from Lev Sell mode.

Here is the complete sectoral picture.

India Sectoral Trend Weekly 11 Feb

Last Week was all red for Indian markets. The Nifty index self was about 1.5% down and the only savior was Friday when the markets closed up.

The sector breadth was all -ive with the bias in strong sector like IT also turning to sell now.

Not a single sector was in Buy or Neutral color as of Friday 11th.

This could prove a major turning point as the breadth has never been so bearish since Mar'09. Any further continuation of the trend for next 1-2 weeks will break the overall Bull trend. This extremeness is also captured in the State of Market Report.

P.S. The trend is based on weekly time frame as of Friday  closing.
      Lev Buy and Lev Sell indicates leverage positioning.
      I have included price change with the color for the confirmation.

 

India Sectoral Trend Weekly 4 Feb

There is no major change in trend in the Indian sectors. The main color remains red only.
Nifty itself was in Lev Sell mode last week and is still continuing the mode.

There are only 4 sectors among all which are still not in Lev Sell mode and only IT sector in Neutral or Buy mode.

The sectoral observations:

1. Auto index is now in Lev Sell mode after 2 weeks of sell mode.

2. The IT indices are now in Neutral for CNX IT and  Buy for BSE IT. The difference is due to there composition.

3. The BSE Teck index is now in Sell mode and the color is getting to red from last 3 weeks.

4. The major losers were FMCG, Realty, IT and Auto Index.

5. The Metal, Oil & Gas, PSU and Caps good being in Lev Sell mode were flat to +ive signalling to show divergence. Need to keep a watch on these indices.

P.S. The trend is based on weekly time frame as of Friday  closing.
      Lev Buy and Lev Sell indicates leverage positioning.
      I have included price change with the color for the confirmation.

US Sectoral Trend: Energy momentum powering ahead

Looking at the US sectoral trend for year to date, XLE i.e. S&P energy ETF  has outperformed SPX by 4% and is best sector.
The other two sectors giving +ive returns were Technology (XLK) and Industrials (XLI).

The snow effect is visible in Cons Staples and Cons Disc sectors as they were under performer by 4% and 2%.

The Utilities has been down for quiet some time. Financials which were leading are now performing in line.

Worth noting is the consistent leadership of Energy sector for last 6 months. There is a momentum theory in play here.

India Sectoral Trend Weekly 28 Jan

This week there is a major change in the report. While sectors maintained their trend Nifty has come to Lev Sell on weekly charts on break of 5650 levels.

The main observation is the increasing number of sectors being in Lev Sell from 21 Jan and the reducing number of sectors in Lev Buy/Buy mode. The bullishness if any was in a very few sectors IT and Metal mainly. This was surely a warning of waning breadth in broad stocks.

The sectoral observations:

1. From Sell to Lev Sell changes: BSE 500, Bankex, Cons D, Dollex,BSE Metal,  CNX 100, Nifty, CNX Bank.

2. New Sell trigger: BSE Healthcare Index.

3. Lev Buy Indices: BSE IT and CNX IT indices. Though the indices are now in buy mode as of Monday morning.

4. The major money loosers were IT and BSE Teck indices (were in Lev Buy and buy mode) lost 2% each.

P.S. The trend is based on weekly time frame as of Friday  closing.
      Lev Buy and Lev Sell indicates leverage positioning.
      I have included price change with the color for the confirmation.

Nifty @ 5600: Below 200 DMA

Will there be support?

I really do not know how long this level will hold or will there be a bounce.
The index has seen the strongest sell off in the current bull run.  Weekly color is Lev Sell for Nifty now, first time since Mar 09.


I have been bearish and the color was Nifty was Lev sell on daily charts. Check y'day morning post.

Whenever Index has broken the 200 DMA in a bull run, either it reverses in a day or two or it makes a new low about 2-4% and then stabilizes.  Need to watch the action now.

Color of Major's now. A lot has changed since last time from 24 Jan.  Post here.

India Sectoral Trend Weekly 14 Jan

Here is the weekly trend analysis report. It got delayed due to some technical issues in data.

P.S. The trend is based on weekly time frame as of Friday 14th closing.
      Lev Buy and Lev Sell indicates leverage positioning.
      I have included price change with the color for the confirmation.

The major changes from the last report (post here 7th  Jan) are:

1. CNX IT and BSE Healthcare got downgraded from Lev Buy to Buy mode.

2. BSE Cap Goods and Nifty Junior are now in Lev Sell mode from Sell mode.

3. Major losers CNX Infra, CNS Realty, BSE Cap goods, Oil & Gas, Realty, Bank Nifty were in Lev Sell mode.

4. Only CNX IT got sold off 3% while still being in buy mode. It is the major looser in the buy mode and the main reason was earnings disappointment.

5. Indices in Lev buy mode FMCG, BSE IT, Metal, Teck had only -0.2% cumulative change.

Here is the color view.

US Sectoral Trend: Financials all the way

XLF has outperformed all the other sectors in last 30 days.

The ETF was lagging for last 6 months and was worst performer during that period.

 

 

The defensive sectors such as Consumer Staples, Utilities and Healthcare were –ive.

Continuous improvement in the ISM Manufacturing Index has led to new highs for Industrial ETF as well.

The overall picture shows the improvement in the economy.

India Sectoral Trend Weekly as of 7 Jan

Last week a lot changed in the sectoral trends for India. The major change was in Nifty itself from Buy to Sell mode.  Last week's sectoral trend is here.

P.S. The trend is based on weekly time frame as of Friday 4th closing.
      Lev Buy and Lev Sell indicates leverage positioning.
      I have included price change with the color for the confiramtion.


The major observations are:
1. Nifty trend on weekly is Sell from Lev buy and it was triggered at 5980. Post here.

2. BSE Auto Index, Oil & Gas, Dollex 30 changed to Sell mode now.

3. BSE IT, Healthcare, Metal, Teck and CNX IT are still in Lev buy mode.
   Among then only Metal Index closed -4% and the reversal level for buy mode is 16500.

4.  Lev Sell Indices --> CNX Infra, Realty, BSE Mid Cap, Power Index, PSU Index, BSE Realty, BSE Small Cap, Nifty Mid cap Index.

Color View

India Sectoral Trend Weekly as of 4 Jan

India sectoral color can give a sense of flow which can be used for positioning.
The update is as of 4 Jan eod and are based on weekly charts which are less volatile than daily charts.
This means that the weekly color has more significance than daily color.

Key observations:

1. BSE FMCG index is now in weekly Lev Buy mode which was triggered on Friday 31 Dec.

2. BSE Metal is also in Lev Buy mode.

3. Both the FMCG and Metal Index changed from Neutral to Lev Buy mode which assumes more significance and can be bot on first change of color.

4. Nifty changed to Lev buy from Neutral and has been updated regularly here in this blog.

5. PSU, Midcap and Small cap are in Lev Sell mode. The PSU Index has been in sell mode from 19 Nov.

Color view.
 

India Sector Ranking 20 Dec

I am starting a new series for sectoral ranking so that the bullish and bearish bets can be separated for sectors and we can get an idea what is leading/lagging the markets.

The ranking is based purely on my own system which till now is making sure that no big trend is missed.
I am using weekly data for starting and will soon start the daily updates 2-3 times a week so that we can catch the trend early.

P.S. Please let me know how I can improve these sectoral trends. Any idea is appreciated.

Key observations:

1. BSE Oil & Gas and Metal indices changed from Sell to neutral mode.
2. BSE Power changed from Sell to Lev Sell.

The ranking as of now are like this:

	13-Dec	20-Dec
Sector	Color	Ratings
CNX IT - FUTURES	Lev Buy	Lev Buy
BSE Teck Index	Neutral	Lev Buy
BSE IT Index	Lev Buy	Lev Buy
BSE Healthcare Index	Lev Buy	Lev Buy
BSE Auto Index	Lev Buy	Buy
NSE50 NIFTY	Neutral	Neutral
NSE CNX 100	Sell	Neutral
BSE Sensex	Neutral	Neutral
BSE Oil & Gas Index	Sell	Neutral
BSE Metal Index	Sell	Neutral
BSE FMCG Index	Neutral	Neutral
- BSE DOLLEX 30	Neutral	Neutral
- BSE 200 INDEX	Sell	Neutral
- BSE 100 INDEX	Sell	Neutral
CNX BANK INDEX	Sell	Sell
NSE Jr Nifty	Sell	Sell
NIFTY MIDCAP 50	Sell	Sell
BSE Small Cap Index	Sell	Sell
BSE PSU Index	Sell	Sell
BSE Mid Cap Index	Sell	Sell
BSE Consumer D	Sell	Sell
BSE Cap Goods	Sell	Sell
BSE Bankex	Sell	Sell
- BSE 500 INDEX	Sell	Sell
CNX INFRA	Sell	Sell
BSE Realty Index	Lev Sell	Lev Sell
BSE Power Index	Sell	Lev Sell
CNX REALTY	Lev Sell	Lev Sell

Nifty update: Sectors following.

Nifty has reversed and given a reduced buy signal at 5925 levels. Since the daily is in reduced sell mode so be cautious as it is still to be in neutral or buy mode.

Bank Nifty is in neutral mode.

See the gainers in BSE sectoral indices and compare them with the bullish sectors here

Major gainers : Power, PSU and  Oil & Gas.

BSE Sectoral Strength

I will start doing sectoral strength analysis which can show where the color of flows.
The basic aim of this study is to get the alpha so that strong sectors can be bot weak sectors can be short.

For the starting I will do a basic study and then improve on it further adding more parameters so as to make it comprehensive.

For the last week the summary is as follows:

The bullish strength has been in the following sectors

BSE Oil & Gas BSE Power BSE PSU BSE IT BSE Realty

The bearish strength is in the following sectors

BSE Auto
BSE smallcap
BSE Cons D
BSE Midcap
BSE Bankex.