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).

Global indices vs. Sensex

Many investors, including fund houses, have been taken by surprise by the strong surge in the Indian stock market during the past year. FIIs have shown their faith by remaining net buyers throughout. The Sensex is trading very close to its 52 week high touched in Jan ‘13, and is a short distance away from its all-time high.

The bullishness is not limited to the Sensex alone. Many global indices are looking just as bullish as the Sensex. Some are at life-time highs. Here is a look at the one year charts of four global indices (in blue) compared with the Sensex (in green).

Jakarta Composite vs. Sensex

Jakarta Composite and Sensex have gained an almost identical amount during the past 12 months. Note that Jakarta faced the last major correction back in May ‘12, while Sensex had a good correction during Feb-Mar ‘13. Sensex should resume its outperformance.

Germany DAX vs. Sensex

After moving neck-and-neck till Feb ‘13, Germany’s DAX index has strongly outperformed Sensex during the past 2 months. DAX is currently at a life-time high, but RSI is looking extremely overbought.

Dow Jones vs. Sensex

Though Dow Jones index is near a life-time high, it has underperformed the Sensex during the past year. RSI is overbought, and showing negative divergence by failing to touch a new high.

Argentina MERVAL vs. Sensex

Argentina’s MERVAL index underperformed the Sensex till Nov ‘12, but has surged ahead since then. The Sensex is near a life-time high, but RSI is looking overbought, and a correction may be on the way.

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.

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: Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Jul 13, ‘12

Four weeks back, the Asian index charts were trying to escape from the stranglehold of bears. Their struggles appear to be over as bulls have fought back strongly.

Jakarta Composite Index Chart

There are some interesting patterns visible on the Jakarta Composite index chart. After a double-top reversal pattern, the index dropped sharply below all three EMAs. Though the 20 day EMA crossed below the 200 day EMA briefly, it formed a bullish rounding-bottom pattern to cross above the 200 day EMA within a month. The 50 day EMA never crossed below the 200 day EMA, so technically the index never entered a bear market.

The recovery from the Jun ‘12 intra-day low of 3635 has been more gradual than the correction. Though the index climbed above all three EMAs, it touched a lower top followed by a drop to its entwined 20 day and 50 day EMAs and a break below the blue up trend line.

Is the rally over? Not yet. Some times a sideways consolidation can break a trend line without changing the trend. If the index can continue to rise and move past its Jul 4 ‘12 intra-day top of 4091, a bullish pattern of higher bottoms and higher tops will continue. A drop below all three EMAs can change the bullish equation.

Technical indicators are still bullish, after correcting overbought conditions. MACD is positive and above its signal line, but the histogram is falling. ROC is also positive, but has crossed below its 10 day MA and touched a lower top while the index rose higher. The negative divergence is not corroborated by the other three indicators. RSI fell from its overbought zone, but has started moving up. Slow stochastic also fell from its overbought zone, but is above its 50% level.

All three EMAs are rising and the index is trading above them – which indicates a bull market.

Singapore Straits Times Index Chart

Singapore’s Straits Times index corrected swiftly from a triple-top reversal pattern and technically entered a bear market due to the ‘death cross’ of the 50 day EMA below the 200 day EMA. But the recovery has been equally swift.

Note the bullish rounding-bottom patterns formed by the signal line of MACD and the 20 day and 50 day EMAs. The 20 day EMA has crossed above the 200 day EMA and the 50 day EMA should follow soon to technically confirm a return to a bull market.

But there are some dark clouds on the horizon. Volumes have been sliding as the STI has touched higher tops. All four technical indicators are looking overbought. A correction can happen at any time, and will improve the technical health of the chart pattern.

MACD is positive and above its signal line, but the histogram is falling. ROC is also positive, but has crossed below its 10 day MA – indicating slowing upward momentum. RSI and slow stochastic are in their overbought zones, but failed to move higher with the index. Any dip can be used to add to existing positions.

Malaysia KLCI Index Chart

Malaysia’s KLCI index is in a strong bull market, with all three EMAs rising in tandem and the index soaring to new highs. But it formed a ‘reversal day’ pattern (higher high, lower close) on Jul 12 ‘12 – which may lead to a correction. Note that the index and its 20 day EMA have risen far above the 200 day EMA – a condition that heralds a correction.

Technical indicators are bullish, but showing signs of slowing momentum. MACD is positive and above its signal line, but has stopped rising. ROC is positive and above its 10 day MA, but moving sideways. RSI has slipped below its overbought zone. Slow stochastic has formed a rounding-top reversal pattern inside its overbought zone.

Since the KLCI index is in a bull market, the likely dip will be an opportunity to add to existing holdings.

Bottomline? Asian index chart patterns are back in bull territory after recovering from sharp corrections. Any dips can be used to add to existing positions – but with suitable stop-losses.

Stock Index Chart Patterns: Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Jun 15, ‘12

Three weeks back, chart patterns of the Jakarta Composite, Singapore Straits Times and Malaysia KLCI indices were reeling under strong bear attacks. Straits Times was already trading below its 200 day EMA; Jakarta had just closed below its long-term moving average and KLCI was trying to bounce up from its 200 day EMA.

Jakarta Composite Index Chart

Jakarta Composite tried to cling on to its 200 day EMA for a couple of days before dropping sharply to touch an intra-day low of 3635 on Jun 4 ‘12 – its lowest level since Oct ‘11. An equally sharp pullback found twin resistance from the 200 day EMA and the falling 20 day EMA.

Such pullbacks provide good opportunities to sell. The index has been consolidating sideways between the 3800 level and the falling 20 day EMA. A bear market will be technically confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA.

Technical indicators have corrected oversold conditions but are still looking bearish. RSI and slow stochastic are below their 50% levels. MACD is just above its signal line, but deep inside negative territory. ROC has resumed its fall inside the negative zone. The index may fall to much lower levels.

Singapore Straits Times Index Chart

Singapore’s Straits Times index is trying to form a ‘rounding bottom’ reversal pattern, which is clearly visible in the slow stochastic and the MACD signal line. The index is facing resistance from the 20 day EMA, and needs to move above all three EMAs to return to bull territory.

Technical indicators are beginning to look bullish. Slow stochastic and RSI have climbed towards their 50% levels. MACD is negative, but rising above its signal line. ROC is straddling the ‘0’ line. All four technical indicators touched higher bottoms as the index dropped to a lower bottom of 2712 on Jun 6 ‘12. Positive divergences in all four indicators may help to push the index upwards.

A small entry can be made, with a stop-loss at 2712.

Malaysia KLCI Index Chart

Malaysia’s KLCI index successfully withstood a bear attack by bouncing up from its 200 day EMA. But after crossing above its 20 day and 50 day EMAs on a volume spurt, the upward momentum dissipated. The index has been moving sideways in a narrow range between 1552 and 1582.

Only a convincing move above the 1610 level, backed by good volume support, can restore the earlier bullishness. The technical indicators are beginning to weaken, though they remain bullish. Slow stochastic has slipped down from its overbought zone. MACD is above its signal line and barely positive. ROC is dropping towards the ‘0’ line. RSI is sliding towards its 50% level.

Some more consolidation is expected before the KLCI can climb above 1610.

Bottomline? Asian index charts have reacted differently to the recent bear attacks. Jakarta Composite seems ready to fall deeper into a bear market. Stay away for now. Singapore’s Straits Times is technically in a bear market, but forming a bullish reversal pattern. A small entry can be made. Malaysia’s KLCI index is in a bull market, but stuck in a broad range between 1520 and 1610 for the past 5 months. Hold.