How is Nifty faring against Asian Market indices?

Lately, there has been a lot of talk about how some FIIs have been spooked by the retrospective MAT notices and poor Q4 results from India Inc.

Short-term funds in particular have been on a selling spree that has led to a 10% correction in Nifty – after it touched a lifetime high in early Mar ‘15.

So, what are FIIs doing with the funds pulled out from India? A look at the comparative charts of six Asian indices clearly show that Nifty is not the sole sufferer.

Only Hang Seng has outperformed Nifty – and that too only during the past month.

Hang Seng vs. NIFTY (in green)

The 1 year closing chart of Hang Seng underperformed Nifty till mid-April ‘15. But after touching a 52 week high, it has also faced a correction, and may be forming a head-and-shoulders reversal pattern.

Jakarta vs. NIFTY (in green)

The Jakarta Composite index has consistently underperformed Nifty dirong the past year.

Korea KOSPI vs. NIFTY (in green)

Korea’s KOSPI index spent several months in negative territory, but managed to eke out a small gain during the past year – but has clearly underperformed against Nifty.

Malaysia KLCI vs. NIFTY (in green)

Malaysia’s KLCI index has spent the past year in negative territory, and has been the worst performer among the Asian indices.

Singapore STI vs. NIFTY (in green)

Singapore’s Straits Times index has mimicked Jakarta’s moves – making a small gain but underperforming Nifty throughout the past year.

Taiwan TSEC vs. NIFTY (in green)

Taiwan’s TSEC index tried to keep pace with Nifty, but dropped off from Aug ‘14 onwards. It managed an 8% gain during the past year, underperforming Nifty by 50%.

Small investors should take heart. The present corrective move in Nifty is an opportunity to enter good large-cap stocks. You will reap the benefits when Nifty touches 12,000 (yes, it will – in the not-too-distant future).

A look at charts of Asian indices

The slowdown in economic growth in USA and Eurozone countries had a huge impact on the economies of many Asian nations – particularly those that were heavily dependent on inbound tourism and exports to North America and Europe.

Many of these Asian countries are geographically small in size and do not have a sufficiently large population that can sustain growth through domestic consumption. They suffered the most.

Even in China, which is large both in size and population, export-fuelled growth has slowed down somewhat – though growth remains quite high by global standards. The interesting thing to observe is that most stock market indices have suffered less than the respective economies.

This may partly be due to the flood of liquidity unleashed by quantitative easing programmes in USA and Europe. It may also be due to the realisation among investors that the worst is over and growth can only improve from now on.

Here is a look at the one year charts of Asian indices:

Shanghai Composite

The Shanghai Composite shows the greatest disconnect between the state of the economy and the stock market. The economy is still growing better than most in spite of some slowdown – but the index was deep in a bear market till Nov ‘12. Even after briefly returning to bull territory, it has formed a head-and-shoulders reversal pattern that can push the index down below its 200 day EMA.

Hang Seng

The Hang Seng index suffered at the hand of bears from May ‘12 to Aug ‘12, and is currently undergoing some profit booking. But it is clearly in a bull market.

Taiwan TSEC

The Taiwan TSEC index suffered a bear phase from Apr ‘12 to Nov ‘12, but has re-entered a bull market. The index has just about recovered its losses during the year.

Jakarta Composite

Despite a brief drop into bear country during May-Jun ‘12, the Jakarta Composite index has been in a long-term bull market and an outperformer among Asian indices.

Malaysia KLCI

Malaysia’s KLCI index has been in a year-long bull market, but it has been a volatile rally with occasional dips below its 200 day EMA.

Singapore STI

Singapore’s Straits Times index has been in a bull market after suffering a correction during May-Jun ‘12.

Korea KOSPI

Korea’s KOSPI index had a long struggle with the bears, but seems to have returned to a bull market for the past 3 months. It has failed to make any gains during the past 12 months.

How Asian stock indices have performed vs. BSE Sensex

In a post on Sep 15 ‘12, a comparison was posted between Asian stock indices and BSE Sensex. Except for the stock indices of Malaysia and Singapore, which had outperformed the Sensex over the previous 12 months, the Sensex did better or was an equal performer – thanks to good FII inflows.

Of late, the Sensex has been correcting after crossing the psychological 20,000 level. It could be due to the poor GDP number; or, it could be collective fear due to proximity to previous tops (which were followed by big corrections); or, it could be routine profit booking. Whatever be the reason, smart investors are probably using the dip to add.

Note that the Sensex has given positive returns over the past 6 months, as have 6 of the 7 Asian indices – with the Malaysian index being the sole exception.

China (Shanghai Composite) vs. Sensex

China’s economic growth has been higher than India’s, but that is not reflected in the Shanghai Composite index, which has underperformed the Sensex – except in the first week of Feb ‘13.

HongKong (Hang Seng) vs. Sensex

For a couple of months – from mid-Aug to Mid-Oct ‘12 – the Sensex outperformed the Hang Seng index. Thereafter, Hang Seng has been the better performer despite correcting in Feb ‘13.

Taiwan (TSEC) vs. Sensex

Sensex trailed Taiwan’s TSEC index in Aug and Sep ‘12, but has outperformed thereafter.

Indonesia (Jakarta Composite) vs. Sensex

Jakarta Composite  moved pretty much in tandem with the Sensex till Nov ‘12, but fell behind thereafter.

South Korea (KOSPI) vs. Sensex

South Korea’s KOSPI index led the Sensex till mid-Sep ‘12. Subsequently, Sensex has been the outperformer.

Malaysia (KLCI) vs. Sensex

Malaysia’s KLCI index is the only one that has given negative returns in the past 6 months. No wonder Sensex has outperformed it by a wide margin, despite falling behind in Aug ‘12.

Singapore (STI) vs. Sensex

Sensex outperformed Singapore’s STI index during the past 6 months – which is a bit of a surprise.

How is the Sensex performing against Asian indices?

You may find it hard to believe, but it is true. The Sensex has been the best performing stock index over the past 12 months when compared with its Asian peers.

Through all the chaos, scams, policy inaction, allies of the government turning foes, opposition parties stalling parliament proceedings, high interest rates, high inflation, fiscal and current account deficits, sliding exports, falling Rupee and a slipping GDP – FIIs kept faith in the Indian stock market.

DIIs on the other hand, played contrarian by selling off. Perhaps many were forced to do so as retail investors pulled money out of the market. Did anyone other than FIIs gain from the Sensex rise? May be a few fortunate or prudent investors, who locked on to FMCG and Pharma stocks.

Shown below are one year closing chart patterns of Asian stock indices (in blue), compared with Sensex chart (in green):

Shanghai Composite vs. SENSEX (in green)

Except for a brief spell in early Jan ‘12 and most of May ‘12, the Shanghai Composite index was outperformed by Sensex – particularly from Jul ‘12 onwards.

Hang Seng vs. SENSEX (in green)

Hang Seng moved in lock-step with Sensex for the first 5 months of the year, before losing some ground during the rest of the year. But it came close to matching the Sensex performance with a 20% gain for the year.

Taiwan TSEC vs. SENSEX (in green)

Taiwan’s TSEC index managed to hold its own till May ‘12 before getting left behind by the Sensex for the rest of the year.

Jakarta Composite vs. SENSEX (in green)

Except for the first half of Jan ‘12 and during Apr-May ‘12, Jakarta Composite index was no match for the Sensex.

Malaysia KLCI vs. SENSEX (in green)

For the first four months and the last four months of the year, Sensex clearly outperformed Malaysia’s KLCI index. During May-Aug ‘12, the race was a bit closer.

Singapore STI vs. SENSEX (in green)

Singapore’s Straits Times index matched or beat the Sensex performance during the first 8 months of the year, and notched up a creditable 20% gain. But Sensex outperformed STI during the last 4 months.

Korea KOSPI vs. SENSEX (in green)

For a few days in Mar ‘12 and May ‘12, Korea’s KOSPI index tried to hang on to Sensex coattails, only to be left far behind.

BRIC is old news; CAASH is the new King

An interesting email received a few days ago - from James Anderson, an astute international investor - mentioned that for global fund managers, BRIC (Brazil, Russia, China, India) has become yesterday’s news.

The new block on their investment radar is CAASH (Canada, Argentina, Australia, Singapore, Hong Kong). How does the one year closing chart of the Sensex (in green) compare with charts of the CAASH indices (in blue)? Have a look.

Canada (TSX Composite) vs. Sensex

In the past 12 month, Canada’s TSX Composite index barely managed to eke out positive returns. After lagging behind in Dec ‘11 and Jan ‘12, Sensex has handily outperformed TSX Composite by 15%.

Argentina (MERVAL) vs. Sensex

Argentina’s MERVAL index outperformed Sensex during Jan ‘12, but drifted down to provide negative returns during the past year. Sensex outperformed MERVAL by 20%.

Australia (All Ordinaries) vs. Sensex

Australia’s All Ordinaries index managed 5% returns during the past 12 months. Except during Dec ‘11, Jan ‘12 and May ‘12, Sensex outperformed All Ordinaries.

Singapore (Straits Times) vs. Sensex

After underperforming Singapore’s Straits Times index for most of the year, Sensex managed to edge ahead since Nov ‘12.

Hong Kong (Hang Seng) vs. Sensex

Hong Kong’s Hang Seng index is the only one among the CAASH block that has outperformed Sensex during the past 12 months – except for brief spells in Jul ‘12, Sep ‘12 and Oct ‘12.

How is the Sensex performing against global indices?

The Sensex bottomed out in Dec ‘11 after more than 13 months of a bear phase. In Jun ‘12, it formed a higher bottom and has been in an uptrend ever since. Technically, it looks like the early stage of a new bull market in the Sensex.

Though the index is trading more than 10% below its Nov ‘10 top, many stocks have touched their all-time highs – thanks to relentless buying by FIIs. There have been some doubts about the real source of such FII inflows. Apparently, a lot of black money is being funneled out through ‘hawala’ routes and round-tripping back into the country in the garb of FII investments.

Where are the ‘real’ FIIs buying? A look at the 1 year closing chart patterns of some global indices may provide some clues.

Brazil IBOVESPA vs. SENSEX (in green)

After outperforming the Sensex till May ‘12, Brazil’s IBOVESPA index has underperformed for the past 6 months. Some FII money may have been diverted from Brazil to India of late.

Russia RTSI vs. SENSEX (in green)

Russia’s RTSI index was an equal performer with the Sensex till Feb ‘12 before outperforming in Apr and May ‘12. Since Jun ‘12, Sensex has outperformed the Russian index. Some FIIs may have booked profits and invested in India.

Hang Seng vs. SENSEX (in green)

The Hang Seng index was an equal performer in Nov ‘11 and again during Jun to Sep ‘12. It has outperformed the Sensex during the other 7 months.

Jakarta Composite vs. SENSEX (in green)

Indonesia’s Jakarta Composite index has comfortably outperformed the Sensex during the past year, clearly indicating which market the ‘real’ FIIs prefer.

Germany DAX vs. SENSEX (in green)

Despite the economic woes in Europe, Germany’s DAX index has clearly outperformed the Sensex during the previous 12 months. Is this an indication that India’s so-called economic growth doesn’t have many takers among ‘real’ FIIs?

S&P 500 vs. SENSEX (in green)

Only during Nov ‘11, and during the recent correction, was the Sensex able to keep up with the S&P 500 index. The slow growth and high unemployment in the US economy hasn’t shaken the faith of FIIs in their home market.

How Asian stock indices have performed vs. BSE Sensex

Strong inflow of FII money has taken the Sensex to a 6 months high – just below its 52 week high touched in Feb ‘12 – making the Sensex one of the better performing stock indices globally. But FIIs have been buying into other countries as well – boosting their stock indices.

Here is a look at how the one year closing chart of the Sensex (in green) compares with charts of some Asian indices (in blue).

China (Shanghai Composite) vs. Sensex

Despite its high-growth economy, China’s Shanghai Composite index has given negative returns and hugely underperformed the Sensex over the past 12 months – moving in the opposite direction since Jun ‘12.

HongKong (Hang Seng) vs. Sensex

In contrast, HongKong’s Hang Seng index has given positive returns during the past 12 months and managed to outperform the Sensex during the first 6 months of this calendar year. Only during the past 3 months has the Sensex been able to overtake the Hang Seng.

Taiwan (TSEC) vs. Sensex

Taiwan’s TSEC index has provided marginally positive returns over the past year. After matching the Sensex performance till Jun ‘12, it got left behind during the last 3 months’ rally.

Indonesia (Jakarta Composite) vs. Sensex

Despite some underperformance during Oct & Nov ‘11 and Feb ‘12, Indonesia’s Jakarta Composite index has kept pace with the Sensex and provided positive returns over the past 12 months.

South Korea (KOSPI) vs. Sensex

South Korea’s KOSPI index outperformed India’s Sensex during a 7 months period from Dec ‘11 to Jun ‘12, before the Sensex caught up during the past 3 months – both indices providing positive returns over the past year.

Malaysia (KLCI) vs. Sensex

During Sep to Nov ‘11 and Feb ‘12, Sensex performed better than Malaysia’s KLCI index. Otherwise, KLCI outperformed the Sensex and gave better returns during the past year.

Singapore (STI) vs. Sensex

Singapore’s Straits Times index outperformed India’s Sensex – except during Oct & Nov ‘11 – and gave better returns over the past one year.

Stock Index Chart Patterns – Hang Seng, Taiwan TSEC, Korea KOSPI – Aug 03, ‘12

In a previous post 4 weeks ago, Hang Seng, Taiwan TSEC and Korea KOSPI index charts had bounced up from higher bottoms touched in Jun ‘12 and were rallying towards their 200 day EMAs. But all three indices were trading in bear markets, so readers were advised to sell the rallies or short the indices with stop-loss at the respective 200 day EMAs.

Hang Seng index chart

The one year daily bar chart pattern of the Hang Seng index made a couple of attempts to move into bull territory. On the first occasion, selling pressure near the 200 day EMA pushed the index below all three EMAs. The same fate may befall the index as it has once again moved up to test its 200 day EMA.

Technical indicators are bullish, but showing signs of weakness in upward momentum. Slow stochastic has almost reached the lower edge of its overbought zone. MACD is barely positive and rising above its signal line. ROC is also positive, but turning down. RSI is above its 50% level, but moving down.

The 200 day EMA is sliding down and the index is trading below it. That means the bears still have the upper hand. However, a continuation of the rally into bullish territory is a possibility. Only a convincing move past the 22000 level will change the trend from bearish to bullish.

Taiwan TSEC index chart

Taiwan’s TSEC index is looking more bearish than the Hang Seng index. It is trading well below its falling 200 day EMA and all rallies are being used by bears to sell.

Technical indicators are mildly bullish, but showing weakening signs. Slow stochastic is above its 50% level, but its upward momentum is slowing. MACD is above its signal line, but both are in negative territory. ROC is positive but sliding towards the ‘0’ line. RSI is above its 50% level, but turning down.

The index closed 50 points lower today (Fri. Aug 3 ‘12). The down move may have resumed already.

Korea KOSPI index chart

Korea’s KOSPI index made a valiant effort to test its 200 day EMA, but fell short and started correcting. The index closed more than 1% lower and below the 1850 level today.

Technical indicators are mildly bullish, but showing signs of weakness. Slow stochastic is above its 50% level, but turning down. MACD is above its signal line and just entered positive territory. ROC is positive but slipping down. RSI is above its 50% level but falling.

A bearish pattern of lower tops and lower bottoms continue.

Bottomline? Chart patterns of the three Asian indices are trying desperately to free themselves from bear strangleholds – but without much success so far. Recovery in the global economies will be a painful and long drawn out process. Asian economies will not be immune to the slow growth in global markets. Fixed income instruments may provide better returns. Alternatively, stay in cash.

Stock Index Chart Patterns – Hang Seng, Taiwan TSEC, Korea KOSPI – Jul 06, ‘12

Five weeks back, Hang Seng, Taiwan TSEC and Korea KOSPI index charts had dropped back into bear markets after brief forays into bull territory. Tests and possible breaches of their previous lows were expected.

All three indices fell to six month lows on Jun 4 ‘12, but touched slightly higher bottoms and embarked on rallies that have taken them past their 20 day and 50 day EMAs. But none of them have managed to cross above their 200 day EMAs. Technically, the indices are trading in bear markets.

Hang Seng index chart

A month long bear market rally from the Jun 4 ‘12 low in Hang Seng has been characterised by diminishing volumes, which is usually the sign of an unsustainable rally. Note that volumes were higher during the sharper rallies in Oct ‘11 and Jan ‘12. There is a good possibility of the current rally fizzling out near the 200 day EMA.

Technical indicators are bullish. Slow stochastic is inside its overbought zone, but forming a double-top pattern. MACD is positive and above its signal line. ROC is positive, but touched a lower top as the index rose higher in Jul ‘12. RSI is above its 50% level, but falling.

The index has formed a bullish pattern of higher bottoms and higher tops. Only a convincing break out above the 200 day EMA can push bears on the back foot. Bears are likely to put up a fight at the 200 day EMA level.

Taiwan TSEC index chart

Taiwan’s TSEC index is in the midst of a bear market rally. Though volumes have perked up of late, they remain much lower than the volumes seen during previous rallies in Oct ‘11 and Jan ‘12. The rally is likely to face strong resistance from its 200 day EMA.

Technical indicators are bullish, but showing signs of weakening. Slow stochastic is about to fall from its overbought zone. MACD is above its signal line, but barely positive. ROC touched a lower top and has dropped to its ‘0’ line. RSI is still above its 50% level, but falling fast.

Stage has been set for another bear attack.

Korea KOSPI index chart

A bear market rally in Korea’s KOSPI index appears to have come to an end already. The index is facing resistance from its falling 50 day EMA and touched a lower top in Jul ‘12.

Technical indicators are looking bearish. Slow stochastic is above its 50% level, but turning down. MACD is above its signal line, but both are in negative zone. ROC is also negative. RSI touched a series of lower tops while the index was rising, and has dropped sharply below its 50% level.

Bears are regaining control.

Bottomline? Chart patterns of the three Asian indices were in the midst of bear market rallies for the past month. These rallies are coming to an end. Such rallies provide selling opportunities. If you go short in any of the three indices, keep a stop-loss at the 200 day EMA. It may be better to stay away and preserve cash.