Pregnant pause: stocks in a lull, volatility at 4-yr low
Caught between signs of an industrial recovery in sound advance tax collection numbers on the one hand and worrying inflation figures on the other, the stock markets are in a bind.business Updated: Dec 17, 2009 20:17 IST
Caught between signs of an industrial recovery in sound advance tax collection numbers on the one hand and worrying inflation figures on the other, the stock markets are in a bind. And it shows in the index deviations that measure volatility. Based on the first 12 days’ data, this month turns out to be the least volatile since 2005.
According to a study by Hindustan Times, of a sample size of 12 trading days each, the standard deviation (which is a measure of variation from the average for a set of data) for the closing prices of first 12 trading sessions in December is the lowest in four years and it stood at 115 points. The last time when there was a lower standard deviation for 12 consecutive trading days was in December 2005, at 95 points.
A standard deviation of 115 means that a majority (66 per cent) of the closing prices in the 12 days fall within 115 points (up or down) of the average closing price for those days.
A lower standard deviation implies low volatility in the market. High volatility started in 2006. “This is one of the few moments when the market pauses after it has found its fair value as there is no conviction on either side,” said Aseem Dhru, chief executive officer, HDFC Securities. “There is no clear view for both bulls and bears.”
Market experts suggest that lot of speculators or investors have taken positions around Sensex value of 16,500 and 17,300 and breaking of these levels on either side will lead to the movement in that direction.