Market Note on Volatility by Purnartha
Markets in the Last Three Months
Volatility has hampered the Indian Equity markets in the last three months. Refer the Table below for the performance of indices:-
|Indices||Oct 1, 2015 to
Jan 21, 2016
|Jan 1, 2016 to
Jan 21, 2016
|CNX NIFTY MidCap Index||(-)7.94%||(-)11.00%|
|CNX NIFTY SmallCap Index||(-)8.75%||(-)15.3%|
Reasons for the Volatility
- Redemptions in FII Funds, ETFs, oil countries, equity investments, etc., worldwide. FIIs have pulled out INR 14,226 crores from the Indian equity market in last three months.
- China uncertainty of hard or soft landing.
- Oil prices have hurt sentiment.
- Momentum strategies of algorithmic traders have led to swings. Traders have built more shorts.
Is there a structural problem in India?
- India’s GDP growth is expected to be 5+%.
- A major portion of India’s GDP growth lies in service oriented sector which is insulated from global GDP cues.
- A large percentage of GDP growth is driven by need (Roti, kapda and makaan).
- There are no payment defaults noted worldwide which decreases the likeliness of another recession like 2008, Euro Sovereign Debt Crisis of 2009-10.
What has worked in the current market scenario?
A strong quarterly result overcomes all the negative sentiments of the market.
Example: INFOSYS, After the Infosys’s 3rd Quarter results (refer below table), the stock has gone up by ~4.1% while the NIFTY has fallen by ~3.9% in the same period. Thus, we can see the outperformance of around 8% by Infosys to Nifty after the results.
|Particulars||Q3- FY 16||Q3- FY 15|
|PAT Growth (YoY)||6.62%|
What is the solution to the pain?
As seen in the above example, a good set of quarterly numbers could be a positive catalyst for the share price performance. Below is the list of our recommended stocks with result dates. Also, we have attached the result expectations of our stocks.
|Company Name||Result Date|
Are there any multi-bagger opportunities in the market today?
If volatility continues for the next two-three months then we will be able to identify multi-baggers opportunities.