Nifty Analysis---logic development

Hello Friends,
While going through the threads in traderji today, I came across a small argument regarding the fact---whether Nifty indices/Futures can be manipulated or not---
Well ---I feel --there may exist a very valid point in the manipulation of Nifty---though a bulk manupulation of the index is virtually impossible---
Now whether Manipulation exists or not---the debate can go forever---More over --the trading community(including myself) r hardly interested in the growth of our country's economy ---for we hardly have a vision to gauge the development of our country through a mirror like image of the growth of the stkmarket---
Thus from a Trader's point of view (as well as a rational human being)I think --It will be a very interesting subject---to see---if we can really trap these manipulations to a relatively maximum point of accuracy---so that common people can also become the gainers---Moreover if Manipulators find that Common people r gaining more than them---they may fairly decrease this event , if not stop them(A dream for the time being may be---but then Dreamers only give rise to ideas)---

Now how can we really disect this problem ---I m trying to visualise---I m sure more knowledgables will take part soon in this thread---and a reasonably good outcome will definetely turn out---
(A Special care for this thread is pointed for Amit and Kartick---for u rightly have pointed it out that people like to have more interest in having Tips---rather than analysing them and having Maximum probablity of safe return---So if u can do ur reserch on this topic--it will be a highly satisfying option)
Coming to the problem scenerio---(As per my opinion),we proceed with a few practical assumptions/realities:
1) The CNXNIFTY comprises of a specific no of stocks--having different weitages on diff stks as specified by their SPAN margins---
2) The diff Stocks fall in different industrial sectors
3) The entire index manipulation is virtually impossible
4)FIIs play a key role at present in the Movement of NIFTY FUTURES
5)The FIIs do not always indulge themselves in Market manipulations--They have their partners(bulls) of the local market who r ready to dance in their tunes
6) FIIs always hedge their positions---
7)An abnormal rise in an index/non index stock is invariably followed by its corresponding correction during the alternate half of the monthly cycle --considering the near month positions
8)Open interest in the Nifty positions seems to be a key factor in determination of the trends---
Any more points friends----Seniors/Knowledgables Plz do contribute with an open mind---
Regards,
joy_mitali

Joy,

a very refreshing debatable topic from you. I just want to know

1. What is the Co-relation of Underlying and Derivaties?

like If FII's start manipulating the futures of say Infosys right from opening, does it have any effect on the underlying? or both the prices are different and unaffected?

I belive, after reducing the Capital Gain to 10%, there is more volatality and scope for more manipulation.

Satya

I would like to add my 2 cents, albeit it has been a long time since this thread was started.

IMHO it would be very difficult for FII's to manipultate the index. As I see it, not all FII work in conjunction, we have investors from Japan, Australia, US, Canada, Middle East... and more so, there are a lot of counter balancing forces like Hedge funds, Indian MF, HNIs, Broker consortiums and PSUs like UTI and LIC that would jump at any opportunity to normalize manipulation.

Of the point wether attacking a particular index stock (or stocks) to manipulate the index seems very unlikely. This is because the index (nifty) consists of 50 stocks with no stock having more that 4% constituent of the index. Even if one or 2 stocks were to be manipulated to move up or down 10% the cumulative effect on the index is marginal i.e. less that .02% (hope I have got my calculation right).

I beleive that the index is used by various entities ( I am talking about large transaction, not 10/20 contracts that intraday traders execute) to hedge their portfolios.

Having said this, I do beleive that extremly huge sums of money does magic and some consortium has in the past, on specific occasions been able to move the index without underlying logic.

I am a Nifty Futures fan, and would go a long way to say, (again IMHO) Nifty futures are the least manipulated, most traded and best suited for technical analysis based day trading (i.e. follws the natural laws of statistics without too many abnormalities).

This is really an intresting discussion and I would love for more people to share their views...

Warm regards,
Dhruv

Dhruv,
Most of what you say holds true... but then maybe not all the time.
In my opinion, it is possible to manipulate the index, but only in the last few minutes of trade. By then, most FIIs/ MFs/ institutions have completed their buying/ selling for the day. The volumes are low, and a small order too can move the price. This could be done to exercise options (by making them in the money), move the price above some critical moving average that traders follow etc.
As for the Nifty, there are a lot of stocks that have a weightage above 4%. The highest weightages are Reliance 9.15%, ONGC 8.99%, Infy 6.3%. In fact, there are 7 stocks with weightages above 4%.
Nifty futures are the best available option for any equity hedger/ speculator to trade in... thats for sure!

Thanks for pointing out the correction Ivanboesky, I wanted to write that a huge proportion 75% of Nifty stocks have less than 4% weightage, while ones like ONGC and likes have such huge liquidity that it would be difficult to manipulate them (I am sure I have to eat my words here, 'cuase I too believe that might not really be true).

In my experience, I have found that approporiate technical analysis helps in trading of nifty futures while that is not the same with stocks. i.e. nifty movements (swings) are slow and co-ordinated and never (well... almost never) you have to exit a naked position with a huge loss.

Hi Friends,

Best instrument to trade NIFTY and investment NIFTYBEES

I am giving a table below, its showing movement of nifty in points and %wise over the 10% movement in equity.

With Regards
ashrafchombalan


ACC…………………….. 0.1% ---------- 3.65pts
ABB…………………….. 0.09% --------- 3.29pts
BAJAJAUTO…………. 0.16%--------------- 5.85pts
BHARTITEL………….. 0.54%------- 19.74pts
BHEL……………………. 0.34%----- 12.43pts
BPCL……………………. 0.06%------- 2.56pts
CIPLA………………….. 0.11%---------- 4.02pts
DABUR………………… 0.11%------- 4.02pts
DR.REDDY…………… 0.06%--------- 2.19pts
GAIL……………………. 0.12%---------- 4.38pts
GRSIM………………… 0.06%--------- 2.19pts
GUJ AMBUJA………. 0.09%------- 3.29pts
GSK PHRAMA…….. 0.06%-------- 2.19pts
HCL TECH………….. 0.13%--------- 4.75pts
HDFC…………………. 0.2%---------- 7.31pts
HDFC BANK………. 0.17%-------- 6.21pts
HERO HONDA……. 0.09%--------- 3.29pts
HINDALCO……….. 0.12%--------- 4.38pts
HLL…………………. 0.29%--------- 10.6pts
HPCL………………. 0.06%--------- 2.19pts
ICICIBANK ……….0.36%--------- 13.16pts
INFY…………………. 0.66%-------- 24.13pts
IPCL………………….. 0.04%------- 1.46pts
ITC……………………. 0.4%------- 14.62pts
JET AIR……………. 0.03%------- 1.09pts
L&T…………………. 0.2%------- 7.31pts
M&M……………… 0.09%------- 3.29pts
MARUTI…………. 0.16%------ 5.85pts
MTNL………….. 0.06%------- 2.19pts
NALCO……………… 0.08%----- 2.92pts
ONGC………………. 0.94%------ 34.37pts
ORIENT BANK……. 0.03%------- 1.09pts
PNB………………….. 0.08%--------- 2.92pts
RANBAXY………… 0.09%--------- 3.29pts
REL………………….. 0.06%--------- 2.19pts
RELIANCE………… 0.95%------- 34.74pts
SAIL………………… 0.21%------ 7.68pts
SATYAM…………… 0.16%--------- 5.85pts
SBI…………………… 0.31%-------- 11.33pts
SIEMENS…………….. 0.11%-------- 4.02pts
SUN PHARMA……….. 0.1%--------- 3.65pts
SUZLON…………………… 0.22%--------- 8.04pts
TATAMOTORS………….. 0.19%-------- 6.94pts
TATA POWER………………. 0.06%-------- 2.19pts
TATASTEEL………………… 0.17%--------- 6.21pts
TATA TEA………………….. 0.02%-------- 0.73pts
TCS……………………………. 0.61%-------- 22.3pts
VSNL…………………………. 0.06%-------- 2.56pts
WIPRO…………………….. 0.44%--------- 16.45pts
ZEE…………………………….. 0.06%-------- 2.56pts

Dear Dhruv,

Although, like you I am also an extremely active Nifty Futures Trader, I do feel that it is manipulated on an ongoing basis through 1) ONGC (because of very low float & High Weightage in Nifty ) 2) RIL & a little bit of of Stocks, the manipulation becomes a lot more clearer on the day of expiry especially after 2.00 pm. Ofcourse such manipulations can't be thwarted but the art is in detecting it & stayng on the right side of 'Smart Money' - In my opinion everyone should especially be very very Alert on the Day of Expiry.

Regards
SavantGarde

Hi.............

Interestingly Reliance Industries & ONGC's (2 stocks) combined stake in S&P CNX Nifty is around 20% (more thsn 9% each), additionally their respective BETA figures are 1 and 0.96 which means a 1 rupee rise in any of these stock will result in a 0.10 pts rise in NIFTY.

To add to the debate, Basket trading is one of the various means of High Volume trading that can impact the underlying NIFTY and can be used for manupulation also.

Although I don't look at the Mutual Funds, FII & Hedge Fund Figures of Purchase & Sell but Manipulation also happens through Pre-meditated consultation between the two and more of such entities as a result both end up with huge gains while small traders don't know what hit them from where & as a result scramble to cut their positions.

Regards
SavantGarde

Hi All,

Yes you all are right there is logic in trading nifty its very simple but people are made it very difficult, its so simple and very profitable.

however we have developed tool to trade nifty or any stock using logic.