You must have heard this quote of Warren Buffet that when everyone is greedy, then be afraid and when everyone is afraid, then be greedy. What does it mean? It means that he wants to tell you about some market mood index. Now what is this MMI?
How will you know that people are scared now and how will you know that people are getting greedy now? So they are scared, they are getting greedy. What are you saying, I don’t understand? See, I try to explain.
It means that when people are getting too greedy, it may be that were sitting on the top of a bubble and if everyone is getting greedy, you can see that the index is increasing, Nifty is increasing, Sensex is increasing. People are getting greedy, they will buy more, they will buy more, they will put money, but from here this bubble can also burst and when it bursts, then people generally suffer losses.
Why do they suffer losses? Because when the market was greedy, everyone was greedy, they were buying, then there are some intelligent people who trade with a lot of money. Now you have to understanding the market that who are the market participants.
First of all, FII, Foreign Institutional Investors, they invest a lot of money in the market. After this comes DII, Domestic Institutional Investors, like LIC, Mutual Funds. Now DII is trading with thousands of crores, after this comes HNI, High Net Worth Individuals, now if you are trading with Rakesh Jhunjhunwala, then you have to understand that he is a high net worth individual, he has thousands of crores to trade, to invest, and after this comes retailers.
Retailers like you, me, who trade with some thousands, some lakhs, or some crores. Now some crores are nothing forth market. If you are thinking that I will trade with 5 crores,10 crores, it is nothing because there are big players in the market who are sitting in the market with thousands and lakhs of crores. Now the thing is that the people who move the market, they do it. After this, HNI comes somewhere and in the last, the impact of the retailers comes.
Snow it is seen that what is FII doing, what is DII doing here. Now when we talk about future positions of Nifty, you know that we can do future trading. Now when we talk about future positions, the positions that FII is making in it, and some calculations are done and the market mood index is taken out for you. Is the market getting too greedy at this time?
Is it getting fearful? Ultimately, how is the mood of the market? Now what will happen with this mood, if the market is very scared, there is fear in the market, then you will generally see that the price is falling. For example, when you saw in Coved, the lockdown was announced, everyone was scared, extremely fearful, but waist the time to buy? The time to buy is yes.
When everyone is scared, the price may fall little more, but after that, when the bounce back comes, it is also said in the stock market that invest in redtop enjoy the green. When the market is falling, there is a red scenario here.
Here the beer market was going on, here the bull market was going on, but if someone puts money in the bull market, for example, when Nifty was at the price of18000, the amount of money was put in the bull market, there was an extreme greed situation, they are suffering a loss in today’s rate, whether it is a mutual fund or a stock, but what can you do?
Can you see the market mood index? It is very easy in today’s rate, things have become very easy, online, so I would also like to show you. Now we will use a tool that you are getting free on the internet, which is called ticker tape.
If you want to do a fundamental analysis of any stock, you want to see its revenue, you want to see an overview, you want to see the PE ratio, you want to see the debt to equity ratio.
In fact, I am saying that if you want to do a fundamental analysis, then you can easily go to ticker tape and for fundamental analysis, Now, here as you come to ticker tape, you see MMI here, here is your product, there is a screener, there is MMI, there are stocks, you can learn here if you want. Now as soon as you click on MMI, you will see a score here, which will be updated continuously.
Now it is showing updated 1 minute ago, so 1 minute ago it updated and the score of the market is MMI, as I said, market mood index is 62, what does62 mean?
See here you will see the score between 0 to 100. Now what to see, what to understand that here you can see fear, you can see extreme fear, you can see greed, you can see extreme greed, what does it mean?
If the score is 50, then the market is moderate, it is between fear and greed, but when it is above 50, then the scenario of greed has come. At this time, greed is in the mind of people in the market. Now people are greedy, from here the market generally goes from greed to extreme greed. It may also come from greed to fear.
So now you can hold your stocks until the market is not showing extreme greed. If the market is showing extreme greed, then this is the time to leave the market and when is the time to buy?
When the market is in extreme fear or fear, in extreme fear, most of the stocks will show you below their intrinsic value and in the fear situation, some companies will be like this, which you will see that they are trading below their intrinsic value, their current price.
How will it look like, I am going to show you, so if you want to know more about it, youkan clicks on more about MMI and then you can understand, as I showed you here, now it is written below, it is a greed zone. It suggests that investors are acting greedy in the market, but the action to be taken depends on the MMI trajectory.
Nowhere you can see all the zones. You can read about each zone that when the score is below30, then there is extreme fear, there is fear from 30 to 50, there is greed from 50 to70, and there is extreme greed from 70 plus. You can read about that, but I have tried to explain to you in short here.
Now see here, it is important that if you see, yesterday the market was greedy, it is still greedy, greed has decreased a little, greed is decreasing, now you can see that Nifty’s return is negative. If it goes into fear, then the market can fall more, but if it keeps falling, let’s say extreme fear comes, then this can be an indication to buy for you. You can buy from here.
Now here you can download historical data, which is available for the last two years, and here it is also telling below, if you see here that they have tested MMI with ticker tape and MMI has been 88.6%accurate. See here, this orange line is the line of Nifty 50 and the blue line below is the zone of MMI. Now when it is coming red here, red means that brother, get out.
Whenever the market has come red, it is correct and whenever the green comes down, youkan see that it was below30, then there was a buying signal for you and the market has bounced back from there,
the market has gone up from there, so this is also telling its history that MMI works very well in the market. Now what will you do after seeing the score here, after that you can write your favorite stock here,
for example, whether it is Indian oil or Zosmato, you can take any example of Indian oil. So here it is showing for example, I am just trying to show you where you will see the intrinsic value. Sphere the intrinsic value is visible, the current price is also less than the intrinsic value, so there is a buying signal here.
Similarly, when there is an extreme fear situation in the market, then you will see that most of the companies are trading their price at a lower price than their intrinsic value, so a buying opportunity is created.
So what do you understand from this, when you should buy and when you should sell, when you should buy, either the market is in extreme fear or in fear, these are the right spots to buy, the right time and when you should sell, when there is an extreme greed in the market, then you should sell here.
So now hope you have completely cleared MMI from this blog and you must have understood one thing, as I took the example of Warren Buffet that when everyone is greedy, become fearful and when everybody is fearful, become greedy.