It was a rather stagnant day for the markets. We saw a small gap-up opening, but the market essentially stayed at that level throughout the day. While this does not signal that we’re out of the woods or that the trend has changed, it’s simply a pause day. The good news is that we opened with a gap up and managed to hold that gap through the day — that’s the only sign of strength for now. There are a few other subtle indicators that we’ll dive into when we look at the charts.

The main topic of discussion today is how not to get derailed during stock market corrections. Yes, we are currently in a correction, but this isn’t the end of the world. The correction hasn’t gone into any extreme depths yet, and while there are some pain points, it’s very much par for the course, especially considering past market cycles over the last several decades.

Where is the market headed?

Market Overview

First, let’s take a look at how the market is performing. After a strong downward movement, today was a flat day for the Nifty, indicating a pause. This kind of day doesn’t hold much significance on its own — it could signal either a further downturn or a consolidation phase, depending on how things unfold in the next few days. At present, we’re looking for a close above 23,300 to confirm any kind of strength or positive trend shift.

Nifty Next 50

Nifty Junior saw a better performance, gaining 2.6%, but it’s essential to note that it had also taken the biggest hit among all the indices, so this could just be a temporary “dead cat bounce.”

Nifty Mid and Small Cap

In the midcap space, a 2% recovery was seen, but again, this is more of a natural response after a steep drop, and we shouldn’t read too much into it. Small caps gained 1.63%, but all of these segments are still in a downward mode, reflecting the current market sentiment.

Nifty Bank Overview

On a more optimistic note, the Bank Nifty managed to close above yesterday’s high, which means it managed to close the gap. This could be one of the more promising charts among the ones I’ve shown today. If the Bank Nifty continues to build on this momentum and manages to close above today’s high tomorrow, that would be a positive sign for the bulls. Historically, the banking sector often leads the recovery during such times, so keeping an eye on this chart could give us an early indication of a potential market shift.

Advanced Declined Ratio Trends

Looking at the market momentum, we saw 394 advances to 106 declines. This is a reactionary move — when the market falls sharply, some investors, who have been sitting on the sidelines, suddenly step in, trying to pick up bargains. This helps stabilize the market, at least for a few hours or days. If this buying pressure continues, it could lead to short-covering by bears and push the market up, but it’s still too early to say if this will hold.

Nifty Heatmap

Several sectors showed mixed performance today. For instance, TCS, Infosys, and HCL Tech were down significantly — nearly 9% in some cases — which is a concern, especially considering that IT stocks are major market movers. Hindustan Unilever, which is often considered a bellwether for rural demand, closed at new lows, signaling weakness in that segment. The FMCG index itself has been underperforming, and this trend seems to be continuing.

On the other hand, State Bank of India (SBI) showed some good gains, which is reassuring. However, this could just be a temporary bounce. HDFC Bank also gained 0.97%, while stocks like Mahindra, Maruti, Tata Motors, and Ayesha showed positive movements. NTPC saw strong performance as well. Adani stocks were volatile, with big jumps ranging from 12% to 19%. This was likely due to rumors surrounding their fundraising activities, but the price action was notable nonetheless.

PSU banks, particularly the likes of Indian Overseas Bank (IOB), Central Bank, and Yuko Bank, saw a sharp recovery today, rising by 18% in some cases. This is a significant recovery, and while it’s important to remain cautious, it suggests that PSU banks could lead any broader market rally from here. The fact that they closed well above yesterday’s high and managed to recover from breakdown points is encouraging.

Sectoral Overview

Looking at broader sectoral trends, the real estate sector has taken a significant hit. Over the past week, real estate stocks have dropped by 11%, and in the last month, the drop is as high as 16%. What was once a hot sector has started showing nerve-wracking moves for investors, which underscores the volatility in the market. On a 12-month basis, real estate has gained just 3%, while energy and private banks have been the major contributors to the downfall.

Pharma, however, continues to act as a defensive sector, with a strong 28% gain for the year.

Sectors of the Day

Nifty PSU Banks Index

Other sectors like PSU banks and metals also showed gains, with both sectors rising by 4% today.

Story of the Day : The Psychological Journey of Investors

Now, let’s dive into the key theme of today’s video: not getting derailed during market corrections. To illustrate this, we can take a lesson from the 2011-2020 bull run. From 2011 to 2013, the market was relatively flat, with periodic corrections, and investors expected a return to resistance levels after each dip. By 2020, however, a sudden collapse occurred due to the COVID pandemic. At that point, market expectations shifted dramatically from “can we get back to the old highs?” to “how soon can we recover?”

After the initial panic, a phase of hope emerged, followed by relief as the market recovered. The recovery took us back to the previous channel, but it was met with skepticism. Many investors, having seen the market fall so drastically, feared it would crash again. But as the market continued to rise, the optimism grew, and the rally became a full-blown bull market.

However, this phase also led to a certain level of greed, with investors expecting continued upward momentum without acknowledging the inherent volatility and risk of the market. When such corrections happen, they reset expectations, humble investors, and remove the excesses built up during euphoric periods.

Coping with Corrections: Managing Expectations

Market corrections are inevitable, and they serve to reset the market’s psychology. Excess liquidity gets drained, and stocks that were over-owned or overvalued see price corrections. It’s important for investors to understand this cycle — euphoria, denial, fear, panic, and eventually discouragement. While we may not yet be at the stage of discouragement, corrections often force us to reflect on our expectations and reset them.

As an investor, it’s crucial to keep your expectations in check. If you came into the market five years ago, you’re likely ahead of where you expected to be. If you joined three years ago, you’re probably still in a better position than the long-term averages. However, if you entered last year, you might be feeling anxious and discouraged. The key takeaway is that market cycles are long-term, and it’s important to manage your expectations accordingly.

Long-Term Journey and Emotional Detachment

When going through a market cycle, the best thing you can do is detach emotionally and focus on the process and system you’ve set up. When under pressure, many investors tend to deviate from their plans and make hasty decisions. To avoid this, it’s essential to assess yourself from a third-person perspective: Are you sticking to your strategy? Are you making decisions based on emotions, or are you following the plan you set out?

If you’ve educated yourself and developed a sound strategy, you’ll be better equipped to handle the ups and downs. Diversification, asset allocation, and a long-term perspective will help you stay calm and stick to your plan.

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