Indian Summer Brings Heat Back to Nifty Fifty

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• Publié par: cmc-markets
• Nombre de lectures: 15
• Langue: English

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Indian Summer Brings Heat Back to Nifty Fifty

PR Newswire

LONDON, August 1, 2012

LONDON

,

August 1, 2012

/PRNewswire/ --

Indian stocks finally rebound on central bank anticipation

Video of Colin Cieszynski's Nifty Fifty analysis

here

India's

Nifty Fifty Index fell through the back half of 2011 and the first part of

this year. In recent months, however, it has finally started to trend higher,

maintaining its recovery course despite a normal trading correction in July.

Seasonal and interest rate trends suggest that the index could start to attract

even more attention in the coming month. Following these recent changes,

Colin Cieszynski (Senior Market Analyst at CMC Markets) has compiled a special

report into

India's

Nifty Fifty.

Colin's report looks at three key areas to provide an analysis into what the

future holds for the Nifty Fifty: positive seasonal trends that have emerged, the

sector weighting that is unique to

India's

stock market and finally, its recent

recovery trend.

The Reserve Bank of

India's

interest rate was left unchanged for the second

time since June today in an effort to temper inflationary impulses. After two

years of tightening, the RBI had previously cut interest rates in April this year. It

had been expected to announce another 25 basis point interest rate cut in June

but held off as did many other central banks around the world pending the

Greek election and EU summit. The economic growth outlook for the fiscal year

has also been revised down to 6.5% from the initial 7.3% assumed in April.

1. Positive seasonal trends emerging

Seasonal trends in

India

are quite different from other stock markets around

the world. The three weakest months of the year for trading in the Nifty have

traditionally been March (start of summer), June (end of summer) and October

(end of monsoon) which obviously coincide with the changing of seasons.

The strongest period of the year is the winter, running from November to

February, which coincides with 'wedding season' in

India

. Interestingly,

seasonal trading in

India

is most similar to gold which is also influenced by

Indian seasons due to high consumer demand for precious metals.

The first three months of monsoon season have also generally been positive for

the Nifty. This year, the index has been trending higher since late May and

kicked off July with a breakout from a long-term downtrend suggesting that

after a year of slowdown fears in emerging markets dragging on the Index,

normal seasonal trends may be re-asserting themselves.

Average Monthly Return 1987-present

Month

Dow

India

Gold

January

0.37%

1.01%

0.12%

February

0.38%

5.53%

0.28%

March

1.13%

(0.48%)

(0.15%)

April

2.39%

0.47%

1.04%

May

1.16%

4.62%

0.11%

June

(0.64%)

(1.05%)

(0.06%)

July

1.70%

2.24%

0.09%

August

(1.02%)

2.98%

0.68%

September

(0.97%)

2.10%

1.72%

October

0.52%

(2.41%)

(0.01%)

November

1.29%

1.14%

2.15%

December

2.02%

3.62%

0.69%

Source: CMC Markets

2. Sector Weighting

Relative to other major indices around the world,

India's

Nifty Fifty tends to be

more heavily weighted in the energy, information technology and financial

sectors. In comparison with other Asian economies, the technology sector is

more focused on IT services than semi-conductors or software. The index could

benefit from a rebound in energy prices, and improved sentiment toward banks

and the more steady IT service sector not being impacted by the economic

slowdown in the same way that chipmakers could be.

Market Cap Weighting By Country May 2012

US

Asia

India China Australia Europe Latin Am World

Total

100% 100%

100%

100%

100%

100%

99%

100%

Energy

11%

8%

13%

8%

7%

12%

11%

11%

Materials

3%

6%

8%

13%

23%

10%

19%

7%

Industrials

10%

5%

7%

17%

7%

10%

5%

10%

Consumer

Discretionary

11%

9%

9%

9%

3%

9%

5%

10%

Consumer Staples

11%

2%

11%

8%

8%

15%

18%

11%

Health Care

12%

0%

4%

5%

4%

12%

0%

10%

Financials

15%

30%

27%

33%

40%

18%

20%

19%

Information

Technology

20%

28%

13%

3%

1%

3%

0%

13%

Telecom Services

3%

8%

2%

1%

5%

6%

16%

5%

Utilities

4%

4%

4%

3%

2%

5%

6%

4%

Source: CMC Markets

3. Recent recovery trend and the RBI rate decision

Through the first half of this year, export sensitive emerging economies such as

China

,

India

and

Brazil

have been losing steam with key customers in

Europe

,

and to a lesser extent the US. Recognizing the need to stimulate internal

demand, central banks in

China

and

Brazil

have already lowered interest rates

this month.

It is clear from the RBI governor's quotes today that the risk of higher inflation

was key to the RBI decision, with Governor Duvvuri Subbarao stating that

lowering interest rates would only 'aggravate' inflationary 'impulses'.

An additional video is available here, looking at the market outlook

for the US during August.

Traditionally August has been one of the

weaker months of the year for stock markets.

Between central bank

meetings and political developments, this August could be potentially

quite active.

The material (whether or not it states any opinions) is for general information

purposes only, and does not take into account your personal circumstances or

objectives. Nothing in this material is (or should be considered to be) financial,

investment or other advice on which reliance should be placed. No opinion

given in the material constitutes a recommendation by CMC Markets or the

author that any particular investment, security, transaction or investment

strategy is suitable for any specific person.