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How To Identify Nifty Bottom |
rk_a2003
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Post: #1  Posted: Sun Sep 25, 2011 5:02 pm Post subject: How To Identify Nifty Bottom |
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It was said that no one can catch a bottom ( In fact technically speaking at least one person can ,someone should be there at the bottom )
There is a co relation to US$-INR Exchange rates and Index value .It’s not a Total and Direct relation But it could be used as a leading Indicator.
We all knew when FII’s with draw from equity market they sell in rupees and take away the Dollors and rupee depreciates.
See the table below how rupee is at its low when Market is at around bottom.
There are so many other factors that are influencing rupee depreciation. Increasing Crude Imports , Strengthening Dolor Etc.
However Investors may keep a note of this also for identifying market bottom. You may also compare the PE ratio of Nifty/Sensex also .
Compare the PE ratio of NIFTY/Sensex during march 2009 bottom ( Nifty PE was just above 12 , Sensex PE was just above 9), to catch a bottom. Don’t go by absolute value of Index go by PE ratio.
What happened during 2008-09 crash?. Sensex hit bottom of 8891 when INR depreciated by around 22% to 51.67.
Can we anticipate similar action this time ? Sensex/Nifty to reach bottom when USD/INR=52 – 54 (1.20*45).
Date $/INR Sensex
03-Aug-08 42.19 14656
08-Sep-08 45.87 14483
06-Oct-08 48.44 12526
27-Oct-08 49.41 8701
01-Dec-08 49.54 9092
02-Mar-09 51.67 8891
15-Jun-09 48.06 15237
12-Oct-09 46.22 16642
08-Nov-10 44.98 21004
11-Jul-11 44.47 18858
25-Sep-11 49.07 16162
But, Don't use it for Timing, only use it to Identify Bottomed out range and can be used for Investing.
Regards
RK |
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SID2060
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Joined: 04 Nov 2009
Posts: 319
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| Post: #2 Posted: Sun Sep 25, 2011 6:40 pm Post subject: |
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Yeah rk, there is a negative correlation betw usd and stock mkt... And positive correlation betw inr and stock mkt. Best time for a world tour was in jan 2008 when sensex was at 21k, rupee at its peak of 39... And most expensive world tour was in mar 2009 when sensex was around 8k and rupee at life time low around 52 per dollar. In short the best time for a world tour is in bull mkt...
Regards,
S I D
Last edited by SID2060 on Sun Sep 25, 2011 6:49 pm; edited 1 time in total |
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SID2060
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Posts: 319
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| Post: #3 Posted: Sun Sep 25, 2011 6:47 pm Post subject: |
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And sone pe suhaga... Off season ho aur mkt me uptrend bi chal raha ho toh lagega ki free me foreign ghum aaye...  |
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vinay28
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Joined: 24 Dec 2010
Posts: 11748
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| Post: #4 Posted: Sun Sep 25, 2011 9:33 pm Post subject: |
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| I only wish you were right RK. Dollar index and dollar-rupee rate is mostly, if not only, based on external factors and our market has so far fallen only due to them. What happens when domestic factors start surfacing? I am afraid much worse is yet to come. Hope that I am wrong. |
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pkholla
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| Post: #5 Posted: Sun Sep 25, 2011 10:52 pm Post subject: |
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rk_a2003: array bhai you r brilliant. your theory makes (a lot of) sense. Now we need someone to test this in previous situations like 2008-9 so that we can determine whether $-Re peaks AT Nifty bottom OR there is lag or lead. Seriously, we should elevate rka2003 to expert level along with chennai boy
Also, can we take for granted that Nifty top may coincide with $-Re bottom for very similar reasons to those noted by rka2000?
Any comments? |
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Kedarjd
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Joined: 14 Sep 2010
Posts: 35
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| Post: #6 Posted: Sun Sep 25, 2011 11:28 pm Post subject: |
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rk bhai your theory make lot of sense,Also one thing that i observed is
03-Aug-08 42.19 14656
08-Sep-08 45.87 14483
06-Oct-08 48.44 12526
27-Oct-08 49.41 8701
in the last 2 records dollar does not appreciate much which seems to indicate indian MFs and other investors taking out their money and hence no conversion.
Does it make sense,would like to get your reply.
Thanks,
Kedar |
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manass
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Joined: 21 Sep 2009
Posts: 172
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| Post: #7 Posted: Mon Sep 26, 2011 12:39 am Post subject: Re: How To Identify Nifty Bottom |
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Yes RK there is a very good relationship among Dollar-Rupee , Crude & our Market. But NIFTY PE Ratio plays a very vital role, though I do not have any knowledge on the NIFTY PE & DOLLAR- RUPEES.
Any one help us to give insight how / where to know on the above.
Regards |
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rk_a2003
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Joined: 21 Jan 2010
Posts: 2734
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| Post: #8 Posted: Mon Sep 26, 2011 10:20 am Post subject: |
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Yes! there was a bright chance of that as you said.
But, make a note, $-Rs exchange is dependent on so many factors not only on FII's selling.To find out the exact dynamics of your mentioned period it may need a good research.
Till that time we may guess so.
| Kedarjd wrote: | rk bhai your theory make lot of sense,Also one thing that i observed is
03-Aug-08 42.19 14656
08-Sep-08 45.87 14483
06-Oct-08 48.44 12526
27-Oct-08 49.41 8701
in the last 2 records dollar does not appreciate much which seems to indicate indian MFs and other investors taking out their money and hence no conversion.
Does it make sense,would like to get your reply.
Thanks,
Kedar |
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rk_a2003
Black Belt
Joined: 21 Jan 2010
Posts: 2734
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| Post: #9 Posted: Sat Oct 01, 2011 11:53 am Post subject: |
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For those who are interested to know Historical PE levels of Sensex.
Sensex was at it's historical low of around 8 PE in May 2003 (Starting from 1999 ).
Around July 2009 It was around 9 PE.
Right now around 12 PE.
You can also see PE comparision chart of diferent countries.
We may hope if PE again come to around 9-11 range India may attract FII Investements.That is around 10000 - 14000 range.
Hope these Numbers will be usefull for the Investors.
RK |
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vinay28
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Posts: 11748
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| Post: #10 Posted: Sat Oct 01, 2011 12:21 pm Post subject: |
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RK, good post. But I think the situation now is different from 2008 in that the FIIs don't have too many avenues around the world to invest and hence they may buy in India even at higher PEs.
I just get the impression that, as far FIIs are concerned, the worst is over for Indian market, at least as regards to global issues, and they may now take our market to next range of 5200-5700. I hope I am right.
The only concern, and it can be very serious, is that worse is yet to come in domestic news and events. |
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rk_a2003
Black Belt
Joined: 21 Jan 2010
Posts: 2734
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| Post: #11 Posted: Fri Nov 25, 2011 11:18 pm Post subject: Re: How To Identify Nifty Bottom |
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| rk_a2003 wrote: | It was said that no one can catch a bottom ( In fact technically speaking at least one person can ,someone should be there at the bottom )
There is a co relation to US$-INR Exchange rates and Index value .It’s not a Total and Direct relation But it could be used as a leading Indicator.
We all knew when FII’s with draw from equity market they sell in rupees and take away the Dollors and rupee depreciates.
See the table below how rupee is at its low when Market is at around bottom.
There are so many other factors that are influencing rupee depreciation. Increasing Crude Imports , Strengthening Dolor Etc.
However Investors may keep a note of this also for identifying market bottom. You may also compare the PE ratio of Nifty/Sensex also .
Compare the PE ratio of NIFTY/Sensex during march 2009 bottom ( Nifty PE was just above 12 , Sensex PE was just above 9), to catch a bottom. Don’t go by absolute value of Index go by PE ratio.
What happened during 2008-09 crash?. Sensex hit bottom of 8891 when INR depreciated by around 22% to 51.67.
Can we anticipate similar action this time ? Sensex/Nifty to reach bottom when USD/INR=52 – 54 (1.20*45).
Date $/INR Sensex
03-Aug-08 42.19 14656
08-Sep-08 45.87 14483
06-Oct-08 48.44 12526
27-Oct-08 49.41 8701
01-Dec-08 49.54 9092
02-Mar-09 51.67 8891
15-Jun-09 48.06 15237
12-Oct-09 46.22 16642
08-Nov-10 44.98 21004
11-Jul-11 44.47 18858
25-Sep-11 49.07 16162
But, Don't use it for Timing, only use it to Identify Bottomed out range and can be used for Investing.
Regards
RK |
Now US$-INR exchange rate touched 53+ and hovering around 52 .It might have coincided with the withdrawal of funds by FII’s.Experts shouting that Indian rupee may see even 56-58 levels. Horrible…In not too far away times i.e. in 1980 US $ INR exchange rate was 7.887. Can you believe it? Our country expanded in to huge market compared to 1980’s, Human resources flourished like any thing ,GDP increased multifold for which there are very few comparisons in the world. Then why is this devaluation?
The reason – spineless Indian political class. It has no will to take up the development .No courage for self rule. No commitment towards the people of this nation. It just obeying and following the orders issued by so called Developed Nations. They submitted them selves to the authority of the western world. They even don’t have guts to bargain like China. Thought less RBI, Spine less MOF, Will less PMO .What more we can expect?
Still keeping in view the inherent strength of Indian Economy Rupee can not sustain at these levels for longer time. I can not give an exact time frame but with in a year or so it has to come down around 40.
Keep in mind… Equity market fall coupled with rupee devaluation may turn Indian Shares so attractive that at some point fresh foreign funds may rush in to India like a flood. The point just before that could be the bottom for our Markets. I can explain it in theory but please don’t ask me to pin point that actual point of time. Regarding which no one will be aware of. For sure It’s a natural dynamics and it has to happen.
Last edited by rk_a2003 on Sat Nov 26, 2011 12:19 am; edited 1 time in total |
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sonila
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Joined: 04 Jun 2009
Posts: 1786
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| Post: #12 Posted: Sat Nov 26, 2011 12:18 am Post subject: |
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| Rk, v good article. Are u graduated in economics? So in depth analysis !!! |
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rk_a2003
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Joined: 21 Jan 2010
Posts: 2734
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| Post: #13 Posted: Sat Nov 26, 2011 9:04 am Post subject: |
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| sonila wrote: | | Rk, v good article. Are u graduated in economics? So in depth analysis !!! |
Hi sonila,
No I am not .I am an Engineering Graduate. My interest is in Economics, Political science, Sociology, Philosophy & literature. Basically I can say I read a lot.
What I presented is only a bird’s eye view. In depth analysis…..hmmm…It demands much more.
Thanks for your compliment. |
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vinay28
Black Belt
Joined: 24 Dec 2010
Posts: 11748
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| Post: #14 Posted: Sat Nov 26, 2011 11:33 am Post subject: |
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Foreign capital love nothing more than a country with high interest rates and strong economic growth. If a country also has a growing domestic financial market, even better! A booming stock market, high interest rates... What's not to love?! Foreign investment comes streaming in. And again, as demand for the local currency increases, so does its value.
The real question, is when will it happen? Time alone is the solution. |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #15 Posted: Sat Nov 26, 2011 5:24 pm Post subject: |
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Friends: it is called CARRY TRADE. They get loans @ 1-2% in Japan/ US and come here with automated systems and throw crores at market. Make 10%, go back and return the loan. Recent Diwali Muhurat options trading of BSE negated because of faulty automatic trading SW of one broker. I believe some brokers are paying crores to buy/ lease office space near NSE in Worli to get fraction of second advantage over others (meaning people like us!). Have you noticed how frequently our stop losses are nowadays ignored or left unfulfilled as Nifty or other scrip zooms up or down vertically: caused by 2 brokers playing the fool with each other aided by auto systems !!!
We should raise our voices and demand more regulation of such brokers/ FIIs as the problems surfacing in NYSE/ Chicago/ London will sooner or later bug NSE also. |
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