INSUBCONTINENT EXCLUSIVE:
when macro data has been signalling weakness in the economy, earnings have not been supportive of stock valuations and global macros are at
best shaky.
There are other similar signs that show despite the optical resilience Dalal Street has been exhibiting, something is not right
deep down.
The broader market has already been witnessing severe selling pressure amid concerns over a looming economic slowdown, liquidity
crisis in the financial sector and moderation in consumption
BSE Smallcap and Midcap indices are down up to 16 per cent in last one year, while the benchmark Sensex is up 6 per cent.
So, what are
these signs telling us? Pullbacks - falling open interestTechnically, Nifty is slightly oversold on a few indicators on the daily charts,
even though it has been able to defend its 100-DMA on a closing basis so far
This is a positive aspect that can trigger some technical pullback in the market.
But every time the index has witnessed a pullback, there
has been a drop in net open interest (OI)
This indicates short coverings and absence of fresh buying
giving up after a seven-week consolidation in the 11,800-11,850 range
Positive correlation between VIX and NiftyThe correlation between Indian VIX and Nifty50 is typically negative, as a rise in volatility
The correlation turned positive at the start of July, even as Nifty hovered around its all-time high mark hit on June 18, 2019.
Analysts
equity to debtForeign portfolio investors, who poured nearly Rs 83,000 crore in Indian equity market since January this year, have offloaded
shares of worth Rs 4,954 crore in July so far
However, they remain net buyers in the debt segment, at Rs 8,504.78 crore during July 1-12
With a 21 per cent gain, debt funds outpaced equity mutual funds in last one year, signalling a steady shift to the safety of debt.
Wide
diversity in performance within NiftyEquity benchmarks Sensex and Nifty are hovering around their all-time high levels on the strength of
Only 17 Nifty stocks have delivered 10-65 per cent returns to investors in last one year, while 27 have plunged up to 75 per cent
The rest has remained flat
Shankar Sharma, Vice-Chairman and joint MD of First Global, recently told ETNow that everybody is feeling that something is wrong here
The underlying corporate economics are looking terrible
its all-time high of nearly 29 times at a time when the economy is struggling amid liquidity crisis and demand slowdown
An earnings disappointment in June quarter is bound to dent market sentiment
According to Motilal Oswal Financial Services, the risks to earnings remain tilted towards downside, given the weak underlying demand
scenario and lack of private capex
The earnings growth recovery in FY20 is likely to be narrow and led predominantly by financials, even as global cyclicals remain a drag and