The first day after Diwali saw the markets slammed. Pataka was burst today, and at one point, the markets were down nearly 500 points but recovered to nearly 300 points. The proverbial head and shoulders pattern was breaking down today, and the nervousness around the US elections is at its peak. A more worrying factor for the market is the zero profit growth for most Nifty companies.
Where is the market headed?
Market Overview
The markets are tantalizingly near that breakdown point, having almost recovered back to 24,000 after hitting 23,816. It’s still tentative. I feel that it is extremely oversold, and not much downside is immediately possible. I think it needs to consolidate at some point, maybe around 23,300 to 23,400. These two days before the US elections will likely bring maximum pain, depending on the outcome and the world view of the new formation. The Chinese markets are also a bit nervous. The Indian USD/INR hit new lows today, although there was no major damage there.
Nifty was down 1.27%, largely due to large-cap selling, likely by FIIs.
Nifty Next 50
Nifty Next 50, were within the last 56 days’ range. Yes, there was damage of 1.4%, but no net damage versus previous sessions. Compared to Nifty, which went into uncharted territory since the October top today, Nifty Next 50 was still playing around in the previous range.
Nifty Mid and Small Cap
In terms of mid-caps, again, you can see that they have remained where they were since June, so there’s been no net loss so far—just a 1.2% decline for the day. Small caps had a good rally in the last five sessions, giving back only some of that at 1.8% down. So small caps are actually looking the best amongst all indices so far.
Nifty Bank Overview
The Bank Nifty is also bobbing around within the last four to five days’ range, down 0.89%.
Advanced Declined Ratio Trends
Momentum trends show advances at 143 stocks and declines at 355. Certainly, the declines influenced the day. We don’t really know how much FI selling occurred today, but yesterday’s Mourad session figures were small. Both DIIs and FIIs sold on that day.
This brings me to the point that many people buy on the Mahurat session for token sake, but smart investors often sell on that day. I’ve heard a common refrain: if you want to bring Lakshmi into your house, you sell something, and the money comes back. So, you don’t want Lakshmi to go out of your house on the Mourad session. Let me know your thoughts on this; I found it quite a new perspective where buying something on that day isn’t seen as auspicious, but selling is.
So, the FIIs continue to sell. Domestic institutions hopefully bought today; we’ll know the figures later, but the trend of the FIIs is certainly the same.
Nifty Heatmap
There was no place to hide today—Reliance, HDFC Bank, TCS, ITC, LT, and Bharti Airtel were all down significantly. State Bank of India bucked the trend; Mahindra and Mahindra, Tech Mahindra, and CIPLA were up, but not many other stocks in the Nifty were up. Reliance had some rumors of a Jio IPO next year that caused it to recover some lost ground; at one point, it was nearly 4% down. Coal India and ONGC also saw nice declines.
In the Nifty Next 50 space, PNB moved up, Bajaj held 3%, and Mother Sun was up 1.5%. Other notable losses included Indigo, IOC, TVS Motor, BBL, Vedanta, and Tata Power. DLF, which has been making waves with news about their new project expecting a 70% margin and 27,000 crores in top-line expectation, also faced a 4% decline.
Sectoral Overview
Sectoral trends showed the Nifty Bank losing nearly a percent, Nifty Autos also down nearly a percent, with the maximum loss seen in media and metals. Energy stocks also took a hit, although they aren’t listed here. Healthcare, PSU banks, and even pharma didn’t fall as much as the market, bucking the trend in the data we have from the Mourad session and today’s combined. In both sessions together, PSU banks have really shown out. For the month, PSU banks are now positive while IT stocks are down 4.2% for the past week. The last couple of months have been tough for PSU banks, but they are making a comeback. Public sector enterprise stocks and energy stocks have also slumped over the last three months.
Sectors of the Day
Nifty Realty Index
In real estate, some losses were observed in Brigade, DLF, Mahindra Lifespace, Phoenix, Prestige, and Godrej, with the index itself not going anywhere and just bobbing around. First Source was a standout gainer today, up 5.8%. On a day like this, if stocks are gaining, it indicates inherent strength in those stocks, so keep an eye on First Source. This stock has been on a tear, going from 5 rupees to 359 rupees in just a decade.
Stock of the Day
First Source
First Source was a standout gainer today, up 5.8%. On a day like this, if stocks are gaining, it indicates inherent strength in those stocks, so keep an eye on First Source. This stock has been on a tear, going from 5 rupees to 359 rupees in just a decade.
Story of the Day
Now, let’s talk about the zero profit growth scare for the market. The results so far show that many Nifty companies are not experiencing any growth, causing jitters in the market. The question remains: can the bulls hold onto 24,000? The market, in its wisdom, began to fall much ahead of the results, applying the “buy the rumor, sell the news” principle. Once the results are out and are possibly worse than expectations, more selling is likely to follow.
Potential reasons for the current volatility include the Fed meeting outcome on November 7th, the US elections on November 5th, which may take longer to announce if key states are close, and rising oil prices alongside disappointing earnings. Out of 34 Nifty companies, many have shown flat year-on-year growth, and major earnings downgrades are now impacting FY25 and FY26 projections.
Given this, the liquidity is moving out, and the prices reflect this. BPCL, Reliance, and Coal India led the plunge, with mixed performance across banks, IT, consumer, and oil marketing sectors. Nifty FY25 EPS has been slashed by over a percent, and FY26 is also facing cuts. Whenever there are downgrades, some consolidation or a decline in the market is expected since most investors follow earnings. As momentum investors, we don’t focus on earnings, but 98% of the market does, leading to nervousness and panic selling.
Out of the 34 companies that have reported, the top contributors have been ICICI Bank, Access Bank, Bharti Airtel, NTPC, and HDFC Bank. Adverse contributors include BPCL, JSW, Coal India, IndusInd Bank, Reliance, and UltraTech. Given the nature of these results, significant panic is likely among investors. Nine companies have reported below expectations, while ten have beaten expectations, and 15 were in line. There has been a 7% EPS revision of Nifty over the last six months, with only a 5% expected earnings growth for FY25— the weakest since FY20.
So, what’s next? Perhaps we are nearing a bottom. The current narrative of a bear market and claims that India has lost its growth path are prevalent. It’s possible we are at some kind of bottom, but we won’t know for some time. The situation will depend on global flows and how Indian SIPs and domestic flows behave.
Ultimately, one can’t determine if price-earnings ratios or EPS figures are sufficient to sustain the market. This conundrum will always exist. The best approach remains to follow trends and strategies. Personally, I do monthly SIPs and make larger investments when the market is down, like today. I’m not worried about market direction; over time, the momentum strategy I follow will yield results, just as all strategies will.
It’s important not to be concerned about daily market fluctuations. Use opportunities to deploy capital. Consider your thought process: have you exited the market? Are you making partial exits? Are you adding to your positions? Are you worried or indifferent? There are various mindsets you could have. You might feel fearful and run away, or you might hold on and consider adding more. Or perhaps you’re confident in your long-term strategy, knowing you’ve signed up for some risk in exchange for potential returns.
Don’t let volatility scare you. Just as in bungee jumping, you know there will be moments of fear, but ultimately, you’ll be fine. That’s where the market stands now. I hope you enjoy the journey and find success along the way. Thank you for your time. Please share these videos if you like them, and I’ll see you in the next one. Thanks, and goodbye!
