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A Study on Money Flow Indices Using Technical Analysis with Reference to Selected Securities Broking Company

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A Study on Money Flow Indices Using Technical Analysis with Reference to Selected Securities Broking Company Mukt Shabd Journal ISSN NO : 2347-3150 A STUDY ON MONEY FLOW INDICES USING TECHNICAL ANALYSIS WITH REFERENCE TO SELECTED SECURITIES BROKING COMPANY Mr. Kuthadi Vijaykumar1, Mr. B. Santhosh Kumar2 1Roll No: 187R1E0094, Department of MBA, CMR Technical Campus, Hyderabad. 2Assistant Professor, Department of MBA CMR Technical Campus, Hyderabad. Abstract Money Flow Index (MFI) is an important indicator for knowing the performance of stocks. In this research paper the performance of stocks of selected companies had been analyzed using the concept of MFI. It is evident that four companies are performing and created wealth for the investors. Secondary data had been used for the study. The open price, close price and volume are important elements for assessing the MFI. This study provides insights for investors and stakeholders of the respective companies. Keywords: Securities, broking, money flow, investment, capital, financial management, stock market. INTRODUCTION The money flow index (MFI) measures momentum in ICICI Securities Limited (I-Sec) is a subsidiary of a security by showing the inflow and outflow of ICICI Bank Ltd. The company began its operation in money into a security over time. The indicator is May 1995 and continues to grow its operation synonymous with “volume-weighted RSI” as it through expanding its client base and providing integrates volume and mirrors the relative strength different type of services. ICICI Securities Limited is index (RSI) with respect to its mathematical a Registered Investment Advisor under SEBI formulation and categorical classification as a Investment Adviser Regulations, 2013 and has been momentum oscillator. Both price and volume data are offering advisory services under the brand part of its calculation. Traders who use volume in ICICIdirect Investment Advisory Services. The their analysis often look for divergences between Company’s segments include: Broking and volume and price. If volume is trending one way, commission is consists of its equity, currency and while price is trending in the opposite direction, it derivative brokerage services, the distribution of could be a leading indication of an upcoming change third-party products, research, and fees from financial in the direction of the market. Many technical planning/education; Advisory services, which analysts believe that price follows volume. Therefore, consists of equity capital markets services and if volume is trending down while the price trend is financial advisory services that cater to corporate up, some traders will believe that price is likely to clients, the government and financial sponsors; reverse trend to eventually match volume. Since the Investment and trading, which consists of treasury MFI integrates volume data into it, traders may and proprietary trading activities. attribute meaning to divergence between the direction of the indicator and price. A divergence between the NEED FOR THE STUDY indicator and price is very important. There are two Investment decision relates to the decision made by types of divergences positive divergence & negative the investor to amount of funds to be deployed in divergence; both are very useful for trading purpose. investment opportunities. The investor has various While positive divergence indicates opportunity to investment alternatives to invest his/her money in the Buy, negative divergence indicates opportunity to forms of share, bonds, debentures, etc. Investors sell. mainly rely on returns with minimum risk. This study Volume IX, Issue VIII, AUGUST/2020 Page No : 1463 Mukt Shabd Journal ISSN NO : 2347-3150 mainly used to spot divergences that warm a trend change in prices using technical analysis. Next, Money Flow (not the Money Flow Index) is OBJECTIVES OF THE STUDY calculated by multiplying the period's Typical Price 1. To understand the concept of money flow indices by the volume. using technical analysis 2. To analysis price fluctuations of various stocks using technical analysis If today's Typical Price is greater than yesterday's 3. To aware the investors about the price Typical Price, it is considered Positive Money Flow. movements of stock If today's price is less, it is considered Negative Money Flow. Positive Money Flow is the sum of the LITERATURE REVIEW Positive Money over the specified number of periods. The Money Flow Index (MFI) is an oscillator that Negative Money Flow is the sum of the Negative utilizes both cost and volume to quantify purchasing Money over the specified number of periods. and selling pressure. MFI is otherwise called volume- weighted RSI. MFI begins with the common cost for DATA ANALYSIS every period. Money flow is certain when the normal The MFI indicator had been selected for the four value rises (purchasing weight) and negative when companies in this study. The close price, open price the run of the mill value decreases (selling pressure). and volume have been used to create the MFI A proportion of positive and negative money flow is indicator for the selected stocks. The time period of then connected to an RSI recipe to make an oscillator the study is for five years from 2016 to 2020. The that moves somewhere in the range of zero and one MFI indicators values are calculated by using the hundred. As an energy oscillator attached to volume, financial management formulas. MFI is most appropriate to recognize inversions and Figure 1: MFI for Advanced Petrochemical value limits with an assortment of signs. The Money Company Flow Index (MFI) is a technical indicator that generates overbought or oversold signals using both prices and volume data. An MFI reading above 80 is considered overbought and an MFI reading below 20 is considered oversold, although levels of 90 and 10 are also used as thresholds. A divergence between the indicator and price is noteworthy. For example, if the indicator is rising while the price is falling or flat, the price could start rising. RESEARCH METHODOLOGY Secondary data has been used for the study, collection from various magazines, publications, journals, book and reports of various associations connected to the company. Four companies have been selected for this study. The selected four companies are Advanced Petrochemicals, Bharat Electronics Limited, Capital India Finance Limited and Delta Corporation Limited. The yahoo finance was the main source of information for information Interpretation related to stock of the selected four companies. The There is good money flow index performance for the Money Flow Index requires a series of calculations. Advanced Petrochemical Company. The study period First, the period's Typical Price is calculated. Volume IX, Issue VIII, AUGUST/2020 Page No : 1464 Mukt Shabd Journal ISSN NO : 2347-3150 is five years from 2016 to 2020. It is found that there Figure 4: Delta Corporation Limited is no risk associated with the company. Figure 2: Bharat Electronics Limited Interpretation It is found there is consistency in performance of the Interpretation company. The performance of the company is high The performance from the viewpoint of MFI is during 2018 and it had experienced fluctuation in the excellent during 2017 and 2018. Due to recent years. macroeconomic factors there is some deviation in performance of the company. FINDINGS Figure 3: Capital India Finance Ltd ADVANCE PETROCHEMICAL has several buys and several sell signals where the highest positive money flow is 97.31039742 in March 2018 and the lowest negative money flow is 50.57417155 on Feb 2016. BHARATH ELECTRONICS LTD has several buys and several sell signals where the highest positive money flow is 96.87336399on Jun 2019 and the lowest negative money flow is 12.606 on Jan 2017. CAPITAL INDIA FINANCE LTD has several buys and several sell signals where the highest positive money flow is 99.98601856 on Nov 2015 and the lowest negative money flow is 1.906906879 on Jan 2020. DELTA CORP LTD has several buys and several sell signals where the highest positive money flow is 78.73948356on Oct 2016 and the Interpretation lowest negative money flow is 29.50552889on At Capital India Finance Limited the performance Apr 2019. had increased constantly for the first three years of the study period. Later it had experienced the impact DISCUSSION & CONCLUSION of macroeconomic factors. The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and Volume IX, Issue VIII, AUGUST/2020 Page No : 1465 Mukt Shabd Journal ISSN NO : 2347-3150 out of a security over a specified period of time. It is Stock Market. International Journal of Contemporary related to the Relative Strength Index (RSI) but Research in Management, Engineering and Health incorporates volume, whereas the RSI only considers Science, 1(2), 37-45. price. The MFI is calculated by accumulating 7. https://www.daytrading.com/money-flow-index positive and negative Money Flow values (see 8. https://www.moneycontrol.com/news/business/m Money Flow), then creating a Money Ratio. The arkets/how-to-use-money-flow-index-mfi-indicator- Money Ratio is then normalized into the MFI for-profitable-trading-3574341.html oscillator form. The MFI indicator is excellent to know the performance of stocks for a selected period. Most of the investors perform MFI for intraday trading. The money flow index is a momentum indicator that provides insight into how much money is flowing in and out of a security over time. It is designed for traders looking for points of price reversal in a market and would not be a relevant addition to a trend following system. It is recommended that the MFI be used in tandem with other price reversal indicators (e.g., Fisher Transform, Keltner channels, Klinger volume oscillator) to filter false signals and better its accuracy. REFERENCES 1. Narendra, S., & Thenmozhi, M. (2016). What drives fund flows to index ETFs and mutual funds? A panel analysis of funds in India. Decision, 43(1), 17- 30. 2. Prakash, P., & Sundararajan, S. (2016). An Analytical Research on Fundamental and Technical Analysis of ICICI Bank Stocks in India.
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