Sunday, April 1, 2012

Comparative charts of BRIC indices

The BRIC countries are supposed to be the next global economic growth centres. Does economic growth translate into stock market strength? It ain’t necessarily so (with due apologies to the Gershwin brothers). If you’ve not been exposed to Gershwin’s music, click on the link to hear an amazing rendition by violinist Jascha Heifetz.

How are the BRIC stock indices faring? Given below are the 2 years closing chart patterns of Brazil (IBOVESPA), Russia (RTSI) and China (Shanghai Composite) indices as compared with India (Nifty):

Brazil IBOVESPA vs. NIFTY (in green)

Bovespa vs Nifty

The Nifty has outperformed the IBOVESPA index over the past 2 years, though both indices have provided negative returns. Both indices are facing corrections after re-entering bull markets. The bearish technical indicators are pointing to a deeper correction – probably a test of support from the rising 200 day EMA.

Russia RTSI vs. NIFTY (in green)

RTSI vs Nifty

Russia’s RTSI index has been more volatile than the Nifty over the past 2 years by touching higher tops and lower bottoms, but has provided marginally positive returns. The technical indicators are looking bearish. A drop below the 200 day EMA is likely.

Shanghai Composite vs. NIFTY (in green)

Shanghai vs Nifty

The Nifty has outperformed the Shanghai Composite index by a wide margin. China’s economic growth continues to be the highest among the BRIC nations, but its stock index has fared the worst. The technical indicators are looking oversold, so a bounce up may be on the cards. But it will probably be used by the bears to sell.

Despite its negative growth in the previous 2 financial years, the Nifty has lost less than the Shanghai Composite and the Brazil IBOVESPA indices, and been less volatile than Russia’s RTSI index. That may explain why the FIIs are buying in India despite all the scams and poor governance.

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