Author: shyam

Institutional Investing Trends

A quick update to our II Trend report from last month.

Foreign Institutional Investors keep the faith

FII invested $1742.07 million in debt vs $1221.89 million in equities so far in Septmeber.

fii-investments.2012-01-01.2014-09-15

fii-investments-equities.2012-1-1.2014-09-15

Domestic Institutionals were obsessed with debt

In September, DIIs invested Rs 20,379.6 cr in debt vs. -310.5 cr in equity.

dii-investments.2012-01-01.2014-09-15

dii-investments-equity.2012-1-1.2014-09-15

dii-investments-debt.2012-1-1.2014-09-15

A trade for everyone

Not sure what I like better – debt or equity. Debt investors will benefit from the falling interest rate environment in AAA paper and shrinking defaults in sub-primes. Equity investors will benefit from improving balance-sheets and an improving demand-side equation. Stay tuned…

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Keynes’ key to successful investing: He abandoned forecasting

Read an interesting article in the FT by Tim Harford about forecasting. Was hit by a couple of “aha moments”.

First:

Keynes’s track record over a quarter century running the discretionary portfolio of King’s College Cambridge was excellent, outperforming market benchmarks by an average of six percentage points a year, an impressive margin.

The secret to Keynes’s profits is that he abandoned macroeconomic forecasting entirely. Instead, he sought out well-managed companies with strong dividend yields, and held on to them for the long term. Keynes, the most influential macroeconomist in history, realized not only that such forecasts were beyond his skill but that they were unnecessary.

And here’s the other gem:

Most forecasters aren’t actually seriously and single-mindedly trying to see into the future. If they were, they’d keep score and try to improve their predictions based on past errors. They don’t.

This is because their predictions are about the future only in the most superficial way. They are really advertisements, conversation pieces, declarations of tribal loyalty…

Read the whole thing: How to see into the future

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Weekly Recap: Sentiment Surveys are Pointless

world.2014-09-05.2014-09-12

Equities

Major
DAX(DEU) -0.98%
CAC(FRA) -1.00%
UKX(GBR) -0.70%
NKY(JPN) +1.78%
SPX(USA) -0.95%
MINTs
JCI(IDN) -1.41%
INMEX(MEX) -0.80%
NGSEINDX(NGA) -1.18%
XU030(TUR) -5.87%
BRICS
IBOV(BRA) -6.00%
SHCOMP(CHN) +0.24%
NIFTY(IND) +0.23%
INDEXCF(RUS) -1.01%
TOP40(ZAF) -1.13%

Commodities

Energy
Brent Crude Oil -3.51%
Ethanol -9.71%
Heating Oil -2.48%
Natural Gas +1.21%
RBOB Gasoline -2.27%
WTI Crude Oil -1.06%
Metals
Copper -1.90%
Gold 100oz -3.04%
Palladium -5.69%
Platinum -2.89%
Silver 5000oz -2.62%

Currencies

USDEUR:-0.03% USDJPY:+2.20%

MINTs
USDIDR(IDN) +0.54%
USDMXN(MEX) +1.54%
USDNGN(NGA) +0.29%
USDTRY(TUR) +2.98%
BRICS
USDBRL(BRA) +4.28%
USDCNY(CHN) -0.10%
USDINR(IND) +0.42%
USDRUB(RUS) +1.91%
USDZAR(ZAF) +3.06%
Agricultural
Cattle -2.17%
Cocoa +2.55%
Coffee (Arabica) -9.16%
Coffee (Robusta) -4.17%
Corn -4.10%
Cotton +8.16%
Feeder Cattle +1.57%
Lean Hogs +0.14%
Lumber +1.34%
Orange Juice -2.86%
Soybean Meal -1.17%
Soybeans +0.55%
Sugar #11 -8.18%
Wheat -6.71%
White Sugar -5.41%

Credit Indices

Index Change
Markit CDX EM -0.87%
Markit CDX NA HY -0.45%
Markit CDX NA IG +1.45%
Markit CDX NA IG HVOL +5.31%
Markit iTraxx Asia ex-Japan IG -0.61%
Markit iTraxx Australia -0.03%
Markit iTraxx Europe +2.98%
Markit iTraxx Europe Crossover +18.20%
Markit iTraxx Japan -1.67%
Markit iTraxx SovX Western Europe -1.04%
Markit LCDX (Loan CDS) +0.00%
Markit MCDX (Municipal CDS) +0.50%
It was a week when most markets went down but Indian mid-caps rallied like a cat with its tail on fire. Commodities: down, MINT markets: down, USD: up, credit: wide. Indian mid-caps: +3% to +10%.

Nifty Heatmap

CNX NIFTY.2014-09-05.2014-09-12

Index Returns

index performance.2014-09-05.2014-09-12

Sector Performance

sector performance.2014-09-05.2014-09-12

Advance Decline

advance.decline.line2.2014-09-05.2014-09-12

Market Cap Decile Performance

Decile Mkt. Cap. Adv/Decl
1 (micro) +11.06% 81/60
2 +12.97% 91/49
3 +11.06% 90/50
4 +7.52% 80/61
5 +10.47% 87/53
6 +6.29% 84/56
7 +5.64% 83/58
8 +4.40% 78/62
9 +3.14% 74/66
10 (mega) +0.79% 70/71
The action was in the lower end of the market-cap spectrum. The action in CNX 100/NIFTY was nothing compared to what happened in small/midcap stocks.

Top winners and losers

OFSS +9.72%
CIPLA +9.91%
ABIRLANUVO +12.84%
RANBAXY -6.74%
SUNPHARMA -6.03%
SAIL -5.75%
Sunpharma got dinged with an US-FDA inspection. No idea what happened to OFSS…

ETFs

PSUBNKBEES +8.22%
BANKBEES +1.94%
JUNIORBEES +1.31%
NIFTYBEES +0.21%
INFRABEES +0.18%
CPSEETF -0.43%
GOLDBEES -1.10%
Gold continued its tumble. Banks seem to have caught a bid…

Yield Curve

yield Curve.2014-09-05.2014-09-12

Bond Indices

Sub Index Change in YTM Total Return(%)
GSEC TB -0.40 +0.27%
GSEC SUB 1-3 -0.24 +0.81%
GSEC SUB 3-8 -0.17 +1.08%
GSEC SUB 8 -0.10 +0.88%
3-8 year part of the curve saw some action. But the last couple of weeks in the bond markets was as exciting as watching paint dry…

Nifty OI

nifty.puts.calls.SEP.2014-09-05.2014-09-12

Bank Nifty OI

bank-nifty.puts.calls.SEP.2014-09-05.2014-09-12

Theme Performance

Quality to Price +9.52%
Momentum 200 +6.99%
Magic Formula Investing +5.60%
Market Fliers +3.82%
Refract: PPFAS Long Term Value Fund +3.35%
Financial Strength Value +3.31%
Industrial Value +3.13%
Balance-sheet Strength +2.69%
IT 3rd Benchers +2.00%
Piotroski ROC Small Caps +1.94%
Growth with Moat +1.73%
Market Elephants +1.69%
Efficient Growth +1.62%
Enterprise Yield +1.43%
CNX 100 50-Day Tactical +0.76%
ADAG Mania -0.37%
Midcap value stocks shot ahead of the rest of the markets. We have three user contributed themes that are listed under ‘User Contributed Themes’ here.

Thought for the weekend

Sentiment data is inconclusive and sometimes contradictory. There is no signal within the noisy data. Besides, no one has the ability to consistently forecast any of the inevitable market corrections. Its probably best to ignore the short-term action and concentrate on being on the right side of the long-term trend.

Source: Buying Stocks Based on How Other People Feel

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Wiggle or Wobble: Scotland?

Scotland has been part of the United Kingdom for over 300 years. On September 18th, they vote to determine whether they want independence from the Queen or not. The referendum was announced back in 2012 but nobody took it seriously because everybody assumed that it will be a NO vote for independence. But a poll released late Saturday showed pro-independence voters in the lead for the first time since the Scottish referendum campaign began. The British Pound collapsed to a 10-month low once reality dawned on the markets.

usd gbp

Executives from defense, financial-services and energy companies have all voiced concerns for the future shape of their respective industries amid surging support for independence. British defense officials have warned that warship production in Scotland could be affected. Oil and gas companies are worried, for instance, that an independent Scottish government would be more reliant on oil revenue for its budget than the larger U.K. has been. That could provide a temptation to squeeze more tax from companies if production keeps declining and tax revenue shrinks.

Unresolved questions concerning how much the amount of the U.K.’s debt an independent Scotland would assume, and how bond markets would rate that debt have brought huge uncertainty for financial-services companies.

Credit Suisse:

In our opinion Scotland would fall into a deep recession. We believe deposit flight is both highly likely and highly problematic (with banks assets of 12x GDP)…

Citi:

Overall, we do not think that a “Yes” or “No” vote will have a significant impact, barring short-term risks, on prospects for UK equity market returns over the coming quarters.

So far, market jitters have been largely contained to the FX market. But will this wiggle turn into a wobble?

Sources:

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