Global markets are so crazy these days that it is getting difficult to take off your eyes from ODIN terminal,
A typical day of a trader starts with finding out what is happening to China’s stock market. If China has tanked, certainly India will open lower.
At 12.45 you start getting feelers from Europe how FTSE, CAC and DAX have opened. And of course when the Chinese market is down, Europe will also trade down. The two continents are somewhat linked, because 25 percent of China’s exports go to Europe. India market will take its cue from Europe and follow its trail.
Since 90% of the daily stock turnover is in the F & O segment where people play with margins, NIFTY index will go up and down like a roller coaster. It is not uncommon these days to find a 150 + intraday swing.
Towards the closing US market’s index Dow, S&P and Nasdaq futures rates will start blinking on your screen. This further adds to the selling pressure as in a world linked by technology, the stock markets round the world are in synch. It is a good sign to see India tightly integrated with what is happening round the world as it surely means we are gaining ground. But do you really think that a 10% correction in Indian market will take the world down. NO. On 11h June 2015 NIFTY was off from its recent high by 12% at 7958. India sneezed that day but no body got the cold. US market was at it’s all time high. China market too was at its peak. I am forced to derive a conclusion from this fact that India is still pretty low down in the world order.
Another thing you must not have failed to notice that all these swings in stock prices do not mention anywhere how the companies are doing financially. Isn’t the stock price of a company linked with its performance. What has happened with its performance all of a sudden that its price has tanked by over 25%.
To all my readers, I would like to drive home this point that all stocks currently are over priced with NIFTY PE still above 21 against the global standard of 16. It is during such crisis that people start dumping stocks till the point the stock gets back to its fundamental value. Stocks need to fall 50% from their 52 weeks high to reach this point. So far they have fallen 25-30%. I guess there is still some pain left for us to endure.