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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 : iFAST Research Team



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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

1 Year High

1 Year Low

Change since last Month

Rise/Fall

NSE VIX Index

26.85

22/02/2011

34.52 

15.22

27.62%

Rise

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)

1126

31/01/2011

-

-

16.44%

Rise

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

99.32

31/12/2010

-0.46%

-

-2.10%

Money Supply (M3) (Rs. Crore)

62,39,385

28/01/2011

0.6%

-

16.86%

Wholesale Price Index

145.9

31/1/2011

1.2%

-

8.23%

India Purchasing Managers' Index

56.8

31/01/2011

0.17%

-

-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 112.3 31/1/2009 3.0% - 11.6%
OECD Euro Area Leading Indicator Trend 97.569 31/12/2010 -1.1% - 4.4%
OECD Major Five Asia Leading Indicators 155.685 31/12/2010 3.7% - 15.5%
Source: US Conference Board, Organisation for Economic Co-operation and Development


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.

 


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