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JP Morgan’s 6 sentiment indicators bulls need to be wary of

Indian equities have been an outsized beneficiary of easy global liquidity and soft global growth. Consequently FIIs now own 21% of Indian Equities vs. 14% pre-global financial crisis, cautions JP Morgan

The News International Team

Equity market sentiment indicators are beginning to suggest some caution, says brokerage house JP Morgan.

“Our money flow indicator suggests increased interest in export oriented sectors and defensives over the last month. Cyclical sectors and commodities saw outflows,” says the JP Morgan note to clients.

Other indicators that bulls would be worried about: (Extracts from the note)

* Insiders turned net sellers over the month.
* Delivery volumes reduced.
* EMBI (Emerging Markets Bond Index) spreads widened.
* In the Domestic Rates markets, the Yield curve remains inverted, as the short end is pricing in the year-end seasonality,” says the note.

On the positive side, India’s vulnerability to Fed tightening has diminished, feels the brokerage.

And yet, India remains vulnerable to any upheaval in global markets because of high exposure to Indian equities by FIIs.

(Extract from the note)

“Indian equities have been an outsized beneficiary of easy global liquidity and soft global growth.

Consequently FIIs now own 21% of Indian Equities vs. 14% pre-global financial crisis.

Also, the extent of overweight positions on Indian Equities that Emerging Market investors are currently running is at an all time high – 12% vs. the benchmark weight of 7.7%.”

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