In the April 9, 2011 edition of the MarketVision Chronicle, I write about The Beast Called Volume:
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With the incredible match last weekend, and a great victory for India it’s time for some celebration! Additionally it turns out that the government will say okay to Anna Hazare’s claims and the Jan Lok Pal bill will be drafted with both government and civil society input. It’s more about the Indian rejoicing in having stood up to the government than anything else, but that’s still a good reason to cheer.
This week, we talk about Volume in stocks and how it should impact our analysis of where the index and specific stocks are going.
The daily price of stocks provides feedback like we’ve seen in recent newsletters – prices can be deconstructed through moving averages, advance-decline indicators and P/E ratios.
One other thing that daily prices give you is volume. Volume is the number of shares traded every day. Analyzing Volumes is a difficult task, primarily because it is misleading. Do you rank companies by numbers of shares traded? That doesn’t make sense – a Unitech trading at Rs. 40 will have a lot more shares traded than, say, an Infosys at 3000. (In the US, they do compare total number of shares traded, and even their commissions used to be on a per-share basis – concepts that are so alien to India!)
But when you take the same stock, you can compare the number of shares traded, if the stock price hasn’t moved much. Let’s look at the Nifty now.
The European Central Bank raised interest rates by 25 basis points to 1.25% on Thursday, announcing its first hike since July 2008 to counter firming inflation pressures in the 17-country euro zone.
HCL is making all increments performance linked and reducing the number of holidays in line with its operations in the UK, a market that this unit services.
Even if you put zero value on Ajay Piramal, as the stock market is doing right now, you’d have to agree that he’s beaten the hell out of that insanely crazy market.
Since 1988, when he took charge over what is now called Piramal Healthcare, and may soon be called by another name — Ajay Piramal has made his long-term investors not just rich. He’s made them fabulously rich. )