Market Outlook

Nifty is consolidating at the new heights that it has reached, 22,400. It didn’t go anywhere. The Saturday test session was also in this range, so nothing to really worry about right now. The market is digesting the superb gains in the last three, four sessions, from 21,850 to about 22,400 – 500 points have come in a jiffy here, and that is what the market is currently digesting. There is little news that can really derail the market right now. The market is very optimistically looking at the election event, of course, and also on a daily basis, there is positive news, whether it is GDP news, whether it is overseas ratings bodies, IMF upgrading India’s next year growth. Overall, the sentiment is quite good. FIs are incrementally buying, and domestic flows continue

Nifty Heatmap

These few sectors that were already very strong in the last year, year and a half, have again taken the lead. Public sector enterprise stocks, power stocks, infrastructures, these are the ones who are leading. Infosys down 1%. ITC down nearly 1%. Metals having some sort of, you can say, a slight correction after a run-up of the last two days, and NTPC, Power Grid, Coal India, ONGC, BPCL, as you name it, and they were running ahead. So the rally is still on

Sectoral Overview

2.8% on public sector enterprise stocks, 114% in the last twelve months. If you did not like public sector stocks, you’ve missed a huge part of this rally in the last twelve months. And this is usually what happens; under-owned sectors, by the time people start to like them, have already done the run-up.

Real estate, nobody wanted to touch with a barge pole. It is up 125% in twelve months. PSU banks are up 80% in the last twelve months. Pharma, nobody’s even talking about it. It’s already up 61% in the last twelve months. Energy stocks, nobody had focus on those, 82% up.

FMCG was flat, autos were flat to down half a percent, banking slightly up. But the whole action was in energy, metals, and public sector enterprise stocks.

Mid & Small Cap Performance

Mid caps and small caps are sort of range-bound right now, whereas large caps are going up. So as I’ve shown many times in comparative studies over a very long period, both will deliver similar results. But there is a lag. Sometimes large caps are racing ahead. Sometimes small caps are racing ahead. So you can’t really time it so well. Most people can’t time it. At least I can’t do it. So it is better to have exposure in large caps as well as mid caps as well as small caps, and you allow their cycles to play out. Why do we want to sort of hop from one to the other and so on and so forth? Some people like to be only in large caps, that is also fine. Some people like to be only in small caps, that is also fine.

And you can always have your equity exposure hedged with something like gold, which is also, incidentally, at all-time highs. Now nearing 64,000 on the Indian rupee gold price. So when your base capital is at an all-time high and the hedge that you built in for that emergency is also hitting an all-time high, there could be nothing better than that, right? Small caps are taking some beating from where they opened this morning, also covering Saturday’s gap up. So small caps have been the weak link of the market today, but they are hardly 3% from all-time high. So you can’t really complain about small caps at all.

Nifty Bank Overview

Nifty bank is looking slightly promising. It is trying to break out of this range of 4700, and if it does, there is a gap here till 48,000 something. So it looks like bank Nifty is coming back and there is a potential of a rally towards 48,000. And if that happens, I think it will lead the market and it will lead Nifty up and Nifty and large cap names gold.

Highlight – Gold INR

This is the gold INR price in the last decade or more. You can see how from 2015 from 26,000 or 2600 rupee per gram basis, we’ve reached 6400. So gold is a very silent 11.5% compounder. You can go back and check the last 50 years of record. Gold in Indian rupees is not by any means any small feat of return. But then of course, equity people don’t like gold. That’s okay.

Highlight – Nifty Infra

Nifty infra is doing very well, quietly so. Infrastructures, infrastructure projects are running ahead. So people say that 2008 also this happened. A lot of these infra road companies went up. So this will keep happening. Small bubbles in different sectors will keep happening and you’ll have to accept it as part of the market.

Highlight – PSE

Public sector enterprise stocks will not keep going up forever. Public sector banks will not keep going up forever. They will come down or at least give up some of those gains for sure. But at what time after going up, how much? If something has gone from 100 to 300 and we are building a narrative, know that, no, it should come back to 100. It may not be that way. It may go from 300 to 500 and then come back to 300 and stay there. So don’t preempt the market because the market knows much more than all of us put together.

Highlight – Nifty Energy

Nifty energy also doing very, very well. You can see NTPC and Powergrid on all these companies really doing well. So don’t preempt where the energy stocks will top out. Renewable energy stocks are also going up. Just follow the trend. I mean, if the trend is up, we are going up. I mean, that’s as simple as that. This is the chart for public sector enterprise stocks. Again, a new breakout, new high. This by no means is any weak chart. I’ll consider some weakness or some caution after some pivot gets broken. Maybe below 9000, below 8700. But right now, all-time highs. If something is hitting all-time highs, you can’t be worried about it.

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