How are the Markets Looking ?
Nifty remained flat today and formed a doji candle. 21550 odd levels has become an important zone. Nifty took resistance and tried to pass this zone post which it broke out and now its taking support at the same zone. After breaking from this zone, we might see a rally.
Nifty Heatmap
Today’s heatmap was a mixed bag. HDFC Bank lost 0.5%, SBI Life gained 1.5%, Axis Bank gaining 1.2%. IT sector held up pretty well.
Sectoral Overview
The Nifty IT Index, also known as the CNX IT Index, has been in the spotlight, followed by Nifty Auto and Real Estate. Consumption stocks and PSE continued on a good run. Majority of the sectors were flat. PSU Bank lost 0.4%, commodities losing 0.25%, metals were also falttish.
Mid & Small Cap Performance
Mid caps opening at an all time high and then consolidating and closing the day at 47,396 odd levels, relatively weaker than the other benchmarks.
Small Cap has been the strongest, opening at a fresh all time high start and continuing the rally.
Bank Nifty Overview
Nifty Bank we are seeing some consolidation happening. Once there is a breakout from this zone, we will be able to see another rally.
Highlights – Nifty IT Index
If we compare the Nifty 50 and the Nifty IT Index over the past two years, we can see that while the Nifty 50 has gained about 25%, the CNX IT Index is down by 10%. This underperformance has led many investors to disregard the IT sector and overlook its potential. However, it is crucial to analyze the charts and patterns to get a better understanding of the situation.
When examining the IT Index’s chart, we can observe that it is currently about 13% away from reaching a new all-time high. There is a significant support level established around the 26,000 mark, indicating its importance and potential for a rebound. After a significant rally, consolidation is a common phenomenon in the markets, both overall and within sectors. Thus, the consolidation period the IT Index is currently experiencing is a normal part of the market cycle and its coming after a phenomenon rally that it has seen.
Highlights – Nifty IT Stocks
The IT Index is composed of several prominent stocks, with the majority of them showing substantial gains over the past five years. Stocks like Infosys and TCS may have underperformed this benchmark, but outliers like Coforge and Persistent Systems have seen remarkable growth of 12x. These outliers have managed to scale their previous peaks and continue to perform well, highlighting the potential for individual stock success within the sector.
HCL Tech has managed to form a new all time high peak
Coforge after a 2 year consolidation is at a fresh all time high
Persistent System had hit an all time high last September when the IT sector was still in the correction phase and it has been going from strength to strength
It’s important to recognize that sectors, like any other aspect of the market, are cyclical in nature. Expecting a particular sector to continuously perform well indefinitely is unrealistic. After a strong rally, it is common for sectors to enter a consolidation phase before their next leg up. This phenomenon is observable in the IT sector, as well as in other sectors like real estate.
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