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Tracking Leading Indicators

August 28, 2009

As part of a new feature, you can track and view leading indicators on the market and economy that we think matters to the investor. Click on the links within the article to get detailed explainations on why these indicators were used.

Author : Manjunath Gaddi

Untitled Document

Leading Market Indicators

Financial markets are largely driven by fundamentals in the long-run, but near term fluctuations can be due to many factors. Here, we display some indicators which bear significance to the market in terms of the level of risk aversion, sentiment in the market as well as where investor money is moving to.

Investors should note that these indicators are not strictly classified in a particular category, as changes may reflect various happenings in the market. Also, these indicators are subject to individual opinion in interpretation, which may result in different views on the market. For our take on these indicators, click here.

Table 1: Investor Sentiment Indicator
	Last	Last Updated	High	Low	Change since last Month	Rise/Fall
NSE VIX Index	31.17	11/9/2009	85.13	-23.25	18.4%	Fall
Source: Bloomberg and iFAST compilations

Table 2: Liquidity Indicator
	Last	Last Updated	High	Low	Change since last month	Rise/Fall
Indian Equity Fund Net Cash Flow (INR Crores)	-142	31/8/2009	-	-	103.36%	Fall
Source: AMFI and iFAST compilations

Leading Economic Indicators

Economic indicators are often mentioned in many research reports and are usually intended to either present an accurate picture of the current economic conditions or predict how the future economic climate would look like. How are economic indicators relevant to investments? Simply put, company earnings usually rely on the health of the overall economy. The reason is that when an economy is booming, it is rare to see market earnings moving in the opposite direction. Usually, during a time that we see strong economic growth, market earnings do reflect certain levels of sustainable strength.

Markets will always go through periods of expansion and contractions. Historically, years of expansions exceed the number of contractions by a big margin. Investors could benefit from knowing whether an economy is likely to slow-down or accelerate because it affects the health of overall corporate earnings. It is tough for any company to escape the crutches of pessimism during a sharp slowdown in demand. As such what we would be observing from indices would be indications of rise and falls in future demand for consumption, manufacturing and business sentiment. These are leading economic indicators rather than coincident or lagging indicators.

Such indicators are said to be able to predict the direction of the economy in the coming 6 to 9 months. Generally, an uptick essentially means future economic expansion and a downtick means contraction. More explanation on leading economic indicators is provided here.

Table 1: India Leading Indicators
Indicator	Last	Last Updated	Change since Previous Month	Change since Previous Quarter	Change since Previous Year
OECD India Leading Indicator	99.0724	31/7/2009	0.9%	2.17%	-0.72%
Money Supply (M2) (Rs. Crore)	12,67,595	7/31/2009	1.87%	1.39%	14.7%
Wholesale Price Index	-241.1	29/8/2009	1.8%	-2.85%	-0.12%
India Purchasing Managers' Index	53.2	1/09/2009	-3.79%	-4.4%	-8.11%
Source: Bloomberg, OECD, RBI and iFAST Compilations

Table 2: Global Leading Indicators
	Last	Last Updated	Change since Previous Month	Change since Previous Quarter	Change since Previous Year
US Leading Indicator Conference Board	101.6	7/31/2009	0.6%	-	0.2%
OECD Euro Area Leading Indicator Trend	99.4799	7/31/2009	1.6%	-	-0.6%
OECD Major Five Asia Leading Indicators	141.6107	7/31/2009	2.2%	-	7.1%
Source: US Conference Board, Organisation for Economic Co-operation and Development

The Research Team is part of iFAST Financial India Private Ltd.

iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.