The P/B down cycle?

Markets are interconnected because money and information flow is seamless. Yesterday morning we looked at global markets for fundamental rankings based on Price by Book ratio. 75% of the market was under water in Romania, 6% of DOW 30 was under water and Guess what’s the score for India? 46 out of the 50 NIFTY components (92%) have a P/B ratio greater than 1.

As a risk parameter this tells us something similar to what our half yearly rankings told us. High performance ranking of Indian indices reflects well in P/B rankings too. One might call it an India premium, but when 60% of market is above a standard valuation parameters we have an overvaluation skew.

Reliance Communications, Reliance Infra, Tata Steel and Hindalco are the worst P/B valuations Hindustan Unilever, Hero Motors, Cipla and TCS are the top P/B rankers. Since performance is cyclical, a similar cyclicality should be seen fundamental ratios.

Jiseki has a confirming signal for Reliance Communications (bottom ranker), Reliance Infra (bottom ranker), Cipla (top ranker), TCS (top ranker).

From an Elliott point of view, we are looking at a completing corrective b wave up which should hold 5,200-5,350 resistances. This again confirms our negative market bias and is in sync with the P/B overvalued situation.

Enjoy the latest Alpha India.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings of 0 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform.

Alpha is a daily strategy signal product that gives trading and investment signals. Alpha is a numeric Ranking product based on TIME fractals. The signals are illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. Alpha is a part of the time triads analytics developed by Orpheus Research.

Coverage India: CNX100 traded stocks and Indian Indices.

Michesan Anna-Maria, Head of India Research. Anna discovered her interest of markets immediately after completing her graduate studies in Economics. She followed it up with post graduate studies in corporate finance. A host of research work in behavioral finance, option strategies and quantifying market sentiment followed. Anna covers Indian equity and combines Elliott, Time Fractals and Time Analytics to deliver accuracy across time frames. To review some of her work, check out the annual India accuracy report 2009.


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