Weekend Investing Daily Byte - 29 Jan 2024

How are the Markets Looking ?

The Indian stock market witnessed a remarkable surge on the 29th of January, 2024. The Nifty index gained a massive 1.8% and closed around the 21,800 mark, exceeding expectations and surprising market participants. This surge in the market comes after a period of fear and speculation about a potential breakout and consolidation after a Head and Shoulders pattern.

The recovery in the market has been swift, with Nifty bouncing back within just three sessions. This unexpected revival has sparked optimism among investors and analysts. The crucial levels to watch out for are 21,800 and the market peak of around 22,000. If these levels are held, there is a potential for a strong pre-election rally in the short term.

Several factors contributed to this impressive performance of the Indian stock market. One important factor is the positive political developments and the continued support for the current government. Additionally, there has been strong buying activity in major heavyweights, particularly in the energy sector. Energy stocks saw a significant jump, and their long-term charts indicate a breakout and strong momentum.

Nifty Heatmap

The heatmap is supporting green today except Infosys and Mahindra that are down 0.75% and Tech Mechindra down 0.5%, ITC losing 1.2%.

Looking at the performance of individual stocks, Reliance stood out with a massive 7.2% gain and a new all-time high. Reliance has broken out of a consolidation zone and is exhibiting strong bullish momentum. ONGC, another energy stock, up 7%. Coal India experienced a similar gain of 6% along with BPCL up 3.8%. Tata Power has also performed exceptionally well at +3.5%, with significant gains in the current financial year.

The positive performance of energy stocks is indicative of a potential mega-trend in the industry. After years of consolidation and flat performance, these stocks are finally experiencing a breakout, suggesting a favourable market environment.

Apart from the energy sector, banking stocks also showed promise, with Kotak bank leading the chart with a 3.08% gain. HDFC up 1.38% after a major slump. However, private banks and metals have been relatively weak compared to other sectors.

Sectoral Overview

The broader sectoral performance has been impressive, with energy stocks occupying the top spot, gaining 5.2%. PSE stocks (+3.9%), infra, commodities, and PSU banks have also outperformed the benchmark, Nifty 50. Autos, private banks, metals, and real estate have shown decent gains and are looking promising.

Mid-Small & Small Cap Performance

The mid-cap and small-cap indices have also exhibited a good recovery, although not as impressive as the Nifty 50. The mid-cap and small-cap index is very close to reaching a new all-time high, indicating the market’s strength and potential for further gains.

Nifty Bank Overview

Nifty Bank has been consolidating around the 45,300 levels. Banking stocks have done well today, however, a big move is needed to see an uptrend in this sector. As long as Nifty Bank doesn’t breakdown from its support, their will be a decent chance for its revival.

Highlights – Nifty Energy

If we compare FY2024 performance, Nifty is up 28% vs the energy stocks which are up a massive 66%. Focusing on the trend of October 2023, one can see there was a breakout happening in a lot of the energy stocks, post which Nifty Energy were showing a 42% gain in almost 2 months wherein Nifty was flat during this period as shown below.

Reliance

Since mid 2021, Reliance has been consolidating and now after 2.5 years it has picked up and is now supporting a new all time high. Reliance can be seen breaking out of the flag and pole pattern and is looking extremely strong and this could be a strong breakout resulting in good momentum on the upside.

ONGC

ONGC has a similar story when it hit its new all time high previously in 2014 post which it consolidated and has been flat for a long time. It is possible that once ONGC breakouts, it could be a mega trend.

Coal India

Coal India is also seen to be coming out of the zone of consolidation after it peaked in 2015 and broke out after 8 to 9 years. Post the breakout, Coal India saw 100% gains in FY2024.