Nifty 50 Stock Picks

Nifty on edge - Which way do DIIs want to go?

Since I recommend that people invest and trade ETFs (Nifty BeES), I’m also posting this piece here:

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The wafer thin volumes today (Thu. 13.01.11) shows that even a nett negative flow of (-)12 Cr could make the Nifty rise from 5710 levels to close at 5862 – a rise of 152 points. Earlier in this month, an equally small +ve nett inflow resulted in the Nifty dropping about the same number of points!

This is proof, if proof is needed, that when volumes are thin, the market can be easily moved by the smallest of volumes in any direction it chooses. This happens when the market consensus is balanced. i.e. buyers = sellers.

If you look at the data of FII & DII flows (purchases/sales; nett) then you will observe that DIIs have matched their nett buying to match FII nett selling, moving up or down. Or it is the other way around, with FIIs doing the balancing act. It doesn’t matter, up to a point.

Looking at the data from April 2010 to date, I was SHOCKED to find that FII nett for the whole period is that it was domestic money that’s in the market as on date! i.e. DII – FII = Rs. +1,25,803 Cr. Did you know that????

THAT fact explains how the Nifty saw a rise and not a fall. Because DIIs (Indians) believe the India story and FIIs have taken the money they can at this stage.

Unless FIIs now bring in fresh money to short the markets, this Nifty bounce back should in all likelihood continue and see a fresh bull run after some Q3R discounting when FII hot money returns. Nifty ought NOT to go down below the 5700 it tested on 11-1-11 a remarkable date indeed. Although it won’t be a straight line up from here, 2011 should see new highs sooner than people (and especially “analysts”) expect!

And certainly the prospects of a 5500 or 5300 that specialists talk about seem REMOTE. Unless DIIs also sell (dump?) like the FIIs did! Slim chance, since the BIG ones (DIIs) like the LIC will want up, as will GOI for IPO and FPOs lined up!

The trade is UP. Go long at dips. Even better, trade Nifty-ETF : Nifty BeES.

My trading system gave the BUY signal well in time. Don’t you agree? Intraday Nifty chart 12/01/2011 below [1 green = buy; 2 red = Sell]:

Trade safely!

@niftygroup @jsvasan

FB: Nse Nifty Trader

Why I recommend Nifty BeES (ETF)

I’ve been around the stock markets for several decades and followed many ‘hot shot’ fund managers and market analysts. While there are many really good analysts or fund managers, even the best of them rarely ever get to beat the overall market index OVER A PERIOD OF TIME – that spans one or two years.

Individuals often believe that if they pick stocks selectively they’ll get better returns than if they invested in a mutual fund. No doubt this is also selectively true. Traders are even more aggressive in believing that since all stocks don’t move equally – either in direction or amplitude – they’ll be better off making selective trades.

All of this is both true and false. It works sometimes and doesn’t work at other times. Most people have realised this and hence place most of their funds in mutual funds or in mainline stocks while literally gambling with a smaller proportion in stock or futures trading.

However, ALL of this begs the REAL question: Do you invest to keep your money safe and growing well OR do you play the stock market as a pastime or to satisfy a gambling instinct?

Any investor should answer this question as honestly as possible if she/he wishes to be at peace with the results she/he has in this “game”.

If you are playing the gambling game, then I have nothing to say. But if you are wanting to create wealth with your savings growing while you attend to other occupations, then you should know:

1.    Over a period of time, no one beats the market index.

2.    Managing ALL of your investible surplus assumes far greater importance than some smaller sums used to ‘gamble’ fetching good returns. i.e. the ROI on your ENTIRE investible surplus is more important than the ROI on some smaller bets on stocks or futures.

3.    Stocks rally (or drop) in cycles. Different sectors ‘rotate’ the waves of rise & fall. Picking which will be next isn’t possible successfully over longer periods of time. Gains in one can be lost on the next.

4.    Safety should be the first priority (greed is a recipe for disaster) for protecting capital over longer time periods of 1 or more years.

5.    Long Term Trading in the ETFs of the market Index can more easily result beating the very market index you track.

Test this out: Keep two equally large enough sums in portfolios. One trades NIFTYBEES and the other your usual style. Check results over 12 – 24 months.

I’d be happy to hear your views: @jsvasan