Let’s dive into today’s market action and focus on railway stocks, which have been surging significantly. We’ll explore why they are performing so well and discuss strategies for holding or exiting these positions.
Market Overview
The market saw the Nifty open gap down, drop 50-60 points, but recover by close, signaling market strength. It closed at 24,320, near all-time highs.
Nifty Next 50
Nifty Junior opened gap up and closed at 0.11%, with the trend remaining positive.
Nifty Mid and Small Cap
Mid Caps opened gap up but gave up gains, down -0.3%. Recent sessions have shown good growth. Small Caps followed a similar pattern, opening gap up but closing down -0.26%, though the trend remains intact.
Nifty Bank Overview
Bank Nifty fell by -0.5%, consolidating but still above key support levels.
Nifty Heatmap
Today’s heat map shows HDFC Bank continues to slip, highlighting the need for a clear plan and avoiding reactionary trades based on media hype. ONGC stabilized the market, along with Reliance, Hindustan Lever, and ITC providing strong support. FMCG stocks like Nestle and ITC, along with some IT stocks, also gained. Mid Caps and Small Caps showed similar patterns, with gains given up by the close.
Sectoral Overview
FMCG stocks led the gains at 1.6%, followed by public sector enterprise stocks at 1.2%. Pharma lost half a percent, metals lost 0.9%, and PSU banks lost a bigger chunk at -1.6%. FMCG has broken out of a range set in January 2024, closing at a new high, signaling a strong upward trend. This pattern is indicative of a relay race where new sectors support the market upwards while others take a backseat.
Sectors of the Day
Nifty FMCG Index
Only the FMCG sector has moved out of this range. I think this was set in January 2024, and it has broken out, closing at a new high, which is always a very good sign. It is also forming a cup and saucer, or cup and handle pattern, which further supports the rally going upward.
Can you see how suddenly the market sectors have shifted? New sectors are now supporting the market’s upward movement, while the ones that were previously going up are taking a backseat. This is like a relay race that continues to happen, and it occurs all the time in bull markets. This is nothing new.
Stocks of the Day
RCF
RCF is the stock of the day again. Despite the sharp move we had earlier towards the mid and third week of June, there was a sharp correction post that. It kind of took support at the previous high and then moved up. Whenever stocks make these kinds of moves, which may look ridiculous on the chart, always be on the lookout for rebounds and continuation, because stocks mostly don’t just move and stop. Always see that a stock may be trying to shake off weak hands and then start moving again.
All these stocks, including fertilizer and railway stocks, are moving in anticipation of some sops in the budget on 23 July. So, there is no likely weakness coming before that at least. On a longer-term basis, stocks like RCF have broken out of 16-year trends, making these movements very strong.
Story of the Day
Railway Stocks
Railway stocks like RVNL, IRCON, and IRFC surged significantly today, with some nearing 15% gains. RVNL was up 15%, other stocks were up 7-6%, and Texmaco Rail was up 4%. Railtel was up 3%. These stocks have been on the rise, driven by anticipated infrastructure investments and upcoming budget announcements.
The railway minister has disclosed plans for 2,500 passenger coaches, 10,000 additional coaches, and 50 new trains. Stocks move ahead of actual news, and these stocks have been running in anticipation of major announcements. India’s railways have achieved 90% electrification, indicating a strong path of infrastructure change and modernization.
RVNL
The importance of having a clear plan when investing cannot be overstated. Stocks hitting new highs should not be exited prematurely. One must ride the trend until there are clear signs of a reversal. The BBC principle (Bhav Bhagwan Chee) emphasizes that the price is supreme, and one must follow the market rather than dictating it.
RVNL, for instance, was at ₹150 seven months back and is now at ₹565. IRFC was at ₹20 and is now at ₹200. These movements are driven by anticipated budget announcements. For example, RVNL broke out after a long consolidation near ₹30-₹35 and within 18 months, surged to ₹565. You need just one stock with a decent allocation to give a substantial boost to your portfolio. Such opportunities will keep coming, so be prepared to receive them.
IRFC
Momentum investing focuses on buying what goes up and selling what goes down. It is essential to have a simple yet effective strategy: buy stocks that are going up and sell those that are going down. Discipline in investing is vital, maintaining a plan for entries and exits, and not being swayed by media or market noise.
IRFC, for instance, was languishing at ₹20 and is now at ₹200 within a year and a half. This trend is expected to continue with anticipated budget announcements. Stocks like Ircon, which is up 6.2%, continue to make higher tops and higher bottoms, indicating a strong trend. Texmaco Rail, once it broke out to new highs in January 2024, has continued to rise, closing at ₹285.
IRCON
Ircon is up 6.2% again. It is continuously making higher tops and higher bottoms, which indicates a strong upward trend. There’s no reason to give up on this stock as long as it maintains this pattern. However, if it falls and breaks the 180 bottom, then you might consider that the trend is beginning to break.
Texmaco Rail
Texmaco, another railway stock, has also shown impressive growth. Once it broke out to a new high in January 2024, it continued to rise. From Rs 12 during Covid to Rs 285 now, it’s been a remarkable journey.
If you have any railway stocks in your portfolio, please write in the comments why you bought them, why you are holding on, and when you plan to exit. This exercise will help you gain clarity about your investment strategy. Writing down your exit plan can also motivate others to think about their own strategies and be prepared for when it’s time to get out.
There will come a time when you need to exit these stocks, so having a clear strategy is crucial. If you haven’t entered these stocks yet, look for a good setup. If a stock goes up 10-20%, wait for a couple of days for it to cool off a bit. Then, if there’s a good setup, you can take a small short stop loss and enter at that point.
This approach allows for discretionary investing. However, if you prefer non-discretionary, peaceful investing, consider joining a momentum investing strategy. This can simplify the process and potentially yield great returns.
