The WeekendInvesting Newsletter

Another brand new initiative from our Research Desk is The WeekendInvesting Newsletter. This is a daily newsletter that summarizes all the stories we cover during the day(market nuggets), including the daily byte that we shoot every evening. This newsletter will be delivered to your email every evening on market days, providing you with a wealth of market-related information. The newsletter includes both summaries and long-form blogs for all the market nuggets covered. These blogs are also linked to the videos we shoot, so you can choose to watch or read the content according to your preference.

Check out our past newsletters.

From the Research Desk of WeekendInvesting

Understanding the Power of Large Numbers

When we think about millions, billions, and trillions, it’s easy to brush them off as just larger numbers. But the reality is far more mind-blowing than we might initially grasp. For example, a million seconds equals 12 days, while a billion seconds is 32 years, and a trillion seconds stretches to an incredible 31,688 years. These jumps are so large that it’s hard for . . . .

Index changes akin to Momentum Investing

Twice a year, major stock market indices go through significant changes. These changes occur at the end of March and September when the index committee refreshes the list of companies in different indices. The methodology for selecting these companies is primarily based on market capitalization, liquidity, and the impact cost of each stock. Stocks that perform well and see a rise in market capitalization move up to higher indices, while those . . . .

There is not enough Gold

Gold is a vital resource, but its production and consumption patterns vary significantly across countries. Each year, the world produces around 3,000 tons of gold. The top contributors to this figure are Russia, China, Australia, and Canada. Together, these four nations account for approximately . . . . .

Why the Chinese market ran up

In the past week, the Chinese market has experienced significant turbulence, leading many to wonder what’s behind the sudden volatility. As the market prepared to close for a week-long holiday, there were some key events in play that contributed to the recent activity. The Chinese market has been highly influenced by certain . . . .

The Value of Gold as an Inflation Protector

Gold has always been a reliable asset for protecting against inflation. A fascinating comparison shows this by looking at the price of iPhones over the years. In 2008, when the original iPhone was launched, it cost 0.92 ounces of gold. Fast forward to 2024, and the iPhone 16 Pro is priced at . . . .

China Stimulus How long will it last

The Chinese market has shown a clear pattern over the last two decades when it comes to economic stimulus and market reactions. Historically, each time the Chinese government introduces stimulus measures, there has been a significant . . . .

Why Sector funds can be risky

In recent times, defense stocks have witnessed significant declines from their previous highs. For instance, Cochin Shipyard is down by 41%, and Garden Reach has dropped by 40%. Other notable declines include Bharat Dynamics, Data Patterns, and Paras Defense. While these numbers might look steep . . . .

India outshines rest of Emerging Markets

In the past decade, India’s stock market has significantly outpaced other emerging markets, according to a comparison of the MSCI India Index and the MSCI Emerging Markets Index. While many emerging markets have struggled to show notable growth, India’s market has demonstrated . . . .

WeekendInvesting Specials !

AMA Session with Alok Jain

Can you avoid the Small Cap Trap ?

Markets this week

It was a dramatic week as the Chinese market skyrocketed in the first part before going on a holiday. Meanwhile, the Indian market dipped, driven by talks of some hot Foreign Institutional Investors (FII) money shifting to China. Over the past few days, we’ve seen approximately ₹30,000 crore or slightly more moving out from FIIs. Interestingly, Domestic Institutional Investors (DIIs) stepped in, matching that outflow with significant investments, which has helped stabilize the market.

There are several reasons behind the market movement. Tensions have been rising in the Middle East, with rockets fired between Israel and Iran this week, which caused crude oil prices to spike. This is always bad news for India, as the country is heavily dependent on oil imports. Moreover, there’s increasing uncertainty around the upcoming U.S. elections, which are just a month away. Although the Federal Reserve has cut rates, it’s unclear what the future holds on that front. On the domestic side, there are no indications that the Reserve Bank of India (RBI) will cut rates, adding another headwind for the Indian market. Despite these challenges, market levels remain relatively strong, even after a 3-5% decline. Given the exceptional performance over the last 18 months, some consolidation isn’t necessarily a bad thing.

Nifty witnessed a significant drop this week. Last week we were celebrating new highs, but this week it has fallen from 26,300 to 25,000. If you look at the market’s trajectory over the past few years, this correction is pretty much in line with expectations. Even if it dips further to 24,000, it wouldn’t be too concerning. The pivotal level to watch is around 21,200, which marked the bottom on election day. If we break below that, it could signal a significant trend reversal. However, this seems far off, and the worst-case scenario right now looks to be around 23,000. The best-case scenario would be a bounce back from 25,000 next week. The reopening of the Chinese markets, which have been running hard, could further fuel an upward trend in China, potentially triggering more FII selling in the Indian market. However, if the Chinese market slows down, our markets may avoid further declines.

Benchmark Indices & WeekendInvesting Overview

This week, the Nifty 50 lost 4.5%, CNX 200 dropped 4.2%, Nifty Next 50 lost 4.1%, and CNX 500 was down 3.9%. Mid and small caps were relatively spared, with losses of 2.1% and 2.6%, respectively, as FIIs have limited exposure in this segment of the market.

Surprisingly, Mi ATH 2 and Mi 25 both managed to finish the week in the green, while HNI Wealth Builder had a flat week. Other strategies like Mi MT Allcap and Mi 30 saw small declines of -0.6% and -1%, respectively. Mi EverGreen performed relatively well with a -2% decline. Across the board, most of the WeekendInvesting strategies outperformed their respective indices this week.

Sectoral Overview

In terms of sectoral performance, real estate took a major hit, losing 7.7% this week. The auto sector fell by 6.1%, energy by 5.5%, infrastructure and private banking by 5.1%, and consumption by 5%. Public sector enterprises were down by 4%, indicating some profit-taking and weak hands exiting the market. On the positive side, sectors like pharma, metals, and IT did well, with gains of 21-22% in just the first six months of the financial year. Despite the corrections, these sectors remain healthy, and there doesn’t seem to be anything fundamentally wrong.

In terms of sectoral momentum, pharma, metals, consumption, and commodities have been leading the pack. FMCG and PSU banks have shown relative strength in recent weeks, and public sector enterprise stocks have stopped their earlier slide. These insights can provide valuable insights into which segments are seeing traction.

WeekendInvesting Strategy Spotlight

MCX – 2.75x (Mi MT Allcap)

In this week’s WeekendInvesting strategy spotlight, we highlight a long-term momentum strategy using the stock MCX. For the past ten years, MCX had been a frustrating stock for investors, showing no significant growth. However, in the last year and a half, it has surged nearly 4x. Momentum strategies, which largely ignored the stock during its stagnant phase, have now entered at the right time, capturing impressive gains.

For example, one of our strategies entered MCX last year and is now sitting on a 2.75x gain. The beauty of momentum strategies lies in their pre-decided exit rules, which allow investors to remain calm during volatility. Even if some trades result in small losses, the overall portfolio will benefit from larger gains in winning trades.

The key to successful investing isn’t necessarily about beating benchmark returns but having confidence in your strategy. When you trust that your strategy will deliver decent returns over the long term, you can remain patient through short-term fluctuations. Like driving a car with supreme safety, you can invest with confidence, knowing your portfolio is well-protected.

This approach has been exemplified by our Mi MT Allcap strategy, which has delivered 466% absolute returns since November 2018, compared to 163% for the CNX 500. Though there were periods of underperformance, those who stuck with the strategy have been handsomely rewarded.

Rebalance Update

We give advance notice here on the upcoming changes in your smallcase for Monday. This advance notice can be used to ignore Monday’s update if there is no change. If there is a change indicated you can use the smallcase app or log in to weekendinvesting.smallcase.com to see the rebalance. A backup email is sent by mid-day Monday if you have not rebalanced by then and yet another one a

Note: We are not including LIQUIDBEES as an ADD or an EXIT count.

WeekendInvesting Strategies Performance

WeekendInvesting Products – LIVE Index Data

Many of you had asked us to make the index series of all WeekendInvesting Products available so that you could perform your own analysis and studies. You can find a link to the LIVE sheet here and also on the HUB under the support column in the content tab.

Disclaimers & Disclosures

That’s it for this week. See you in the next week’s edition