Where is the market headed?
Market Overview
Nifty surged by more than 500 points. We’ve been discussing this in the last few sessions—that the market is oversold and hasn’t seen a bounce for almost eight weeks now. The fact that yesterday’s shock from the Adani news acted as a stress test for the market, but the markets didn’t fall much, made it clear that there wasn’t much room on the downside. And today, with a nice 500+ point move, it has definitely soothed a lot of nerves.
Of course, we still need to navigate the outcome of the Maharashtra elections, which will be announced tomorrow and Monday. The markets may react to that. But for now, let’s dive into today’s topic, which is IPO investing: Is it a gold mine or a dangerous gamble? Hopefully, this will open the eyes of some investors who consider IPOs to be a gold mine.
As you can see here, we’re looking at where the top of the previous election day high was. That level was acting as support. All this while, it tried to go below that support, but yesterday it closed very near it, and today we saw a solid bounce. The close at 23,907 is actually the highest close in seven days. If you look at the previous six candles, the low and close were all lower than today. This is why I always recommend waiting for at least a two-day high close before getting into any long strategy.
Let me give you an example. Since the market has been falling, we only had two instances of a two-day high close. The first one was a false alarm, as it broke down. But today’s close is the next one. Always wait for at least a two-day high before going long. It’s not rocket science, but it does provide a higher probability of a better outcome.
You can see this happening in the past as well. When the market was falling, there were no two-day high closes. Then there was one, and the market went up. It cracked again, and then there was another two-day high, and the market went up again. This is a precursor to a strong bounce. We don’t know if we’ll go beyond this level, but it looks like a solid bounce at 2.39%. The last time we had a 2%+ move was around the election day, back in June 2024.
Nifty Next 50
Nifty Junior also moved up almost 2% (1.8%), but it hasn’t made it to a two-day high yet. Adani stocks are still holding back Nifty Junior from fully recovering.
Nifty Mid and Small Cap
On the other hand, Nifty Midcaps gained 1.15%, taking support from the election day high. Small caps saw a minor gain of 0.98%, still within the range of the long-term downtrend, but it’s slowly simmering.
Nifty Bank Overview
Bank Nifty also had a good move of 1.51%, coming back to its breakdown point. Overall, most charts are looking good. Depending on the outcome of the Saturday poll results, we could see more movement on Monday.
Advanced Declined Ratio Trends
Momentum Trends: 113 declines and 382 advances, heavily favoring advances today. As for FII trends, there’s still significant selling in November—around 40,000 crores. However, today’s data will be interesting to see, especially whether this 500-point rally was due to FII participation or not. Yesterday’s Adani news didn’t lead to exceptional selling, which suggests that FIIs haven’t lost confidence in the Indian market. They are selling, but it’s not panic selling.
DIIs, on the other hand, bought 4,200 crores yesterday. So far in November, FIIs have sold around 39,600 crores, while DIIs have bought 35,800 crores.
Nifty Heatmap
Heat Maps: Everything was green today—Reliance up 3.4%, SBI up 4.5%, TCS, Infosys, Titan, ITC all did well. It could be a dead cat bounce, but it’s a very strong one. Nifty Next 50 had stocks like PFC, REC, PNB, VHEL, HAL, Ambuja Cement, and DLF all doing well. Adani stocks and a few others like Varun Beverages, Zomato, and JSW Energy faced slippages, but overall it was a positive day.
Sectoral Overview
Sectoral Trends: Everything was green, with Pharma and Private Banks lagging at 1%. IT and Real Estate gained 3.3% and 3.2%, respectively. IT, Real Estate, and PSU banks have managed to recover from their monthly losses and are riding the green wave. Today’s move is exceptional, and it’s hard to pinpoint if it’s due to the overall market trend or any one specific sector, but it’s certainly a positive sign moving forward.
Sectors of the Day
Nifty IT Index
The IT chart is also breaking out from a consolidation phase, up 3.29%. TCS had a big move upwards at 4.2%, marking a strong rally.
Stock of the Day
Raymond Ltd
Raymond was up 15.8%. It had corrected quite a bit from 2,300 to nearly 1,300, but now it seems to be on its way back up, making a 15.8% jump. On the longer-term chart, Raymond has been very choppy, but since 2020, it’s seen a linear run from 200 rupees to nearly 1,652 now.
Story of the Day : Are they a gold mine or a dangerous gamble?
Take the example of Ola Electric. If you missed the IPO and were upset about not getting allotment, well, you can now buy shares at 68 rupees, much lower than the post-IPO listing price. No damage done if you missed out on that opportunity earlier.
Honasa Consumer (Mama Earth) is another example—down almost 60-70% from its recent highs. If you missed the IPO, no love is lost. You can now buy the stock at much lower prices. Paytm is a classic case. It listed at 2,000 rupees and has fallen to nearly 300 rupees. Now, it’s made a recovery, rising from 300 to nearly 900, which is encouraging, but it took almost three years to make that recovery.
Nika was another high-profile IPO. They made all sorts of claims at the time of listing, but again, please understand why companies come to IPOs. They are trying to maximize the profits of the promoters, pre-IPO investors, and merchant bankers. Their goal is to maximize their returns from selling their holdings. As a retail investor, your chances are slim. During a blind bull run, people get caught up in the brand name and buy blindly, while the promoters offload their stock.
So, always wait for an IPO stock to settle down and then assess it if the chart formation looks good. Nika, for example, listed at 168 rupees and peaked at 425 rupees, but it was better to wait for the stock to settle before jumping in.
Fino Payments Bank, another recent IPO, rose from 200 to 400 rupees, but it’s already back down to 330 rupees. Star Health, which listed in late 2021, fell from 900 rupees to 459 rupees, down 51%. So, there’s a lot of pain in IPOs if you blindly start applying. Be very selective.
Good IPOs that come at the right price are like a lottery ticket. If you manage to get one, the allocation will usually be so small that it won’t make much of a difference to your portfolio. The effort you put into filling out the forms, blocking your money, and applying for IPOs is often not worth it.
Important Statistics: 68% of IPO buyers exit within the first week, and 70% exit within the first month. Retail investors are also guilty of exiting early, with 52% selling within a month. So, what’s the real story with IPOs? They are often seen as ways to make quick money, but there are better ways to achieve that kind of risk. Allotments are small, potential gains are minimal, and they don’t make much of an impact on your long-term financial goals.
If you’re looking for quick profits, maybe IPOs are a good choice. But if you’re serious about long-term investing, there are far better options. Once an IPO is out, the stock will be analyzed publicly, and analyst reports will follow. Stocks typically mellow down post-IPO, which means you’ll have a better perspective on the stock’s long-term outlook.
