And I was mentioning in the last few days that it is very, very unlikely that March is going to be a down month. We already have had five consecutive down months. A sixth consecutive down month is like the rarest of the rare cases. So, that is unlikely to happen with a very, very high probability. And that’s what we are probably starting to see. Now that the market is thawing, some bounce is happening. Of course, not to say that, you know, we are out of the woods or that further fall cannot happen. That is not the point here. The point is that the current crisis is loosening up a bit, if I may say so, and the grip of the bear is loosening up a bit. The bulls will have some breathing space. Hopefully, the March month will be in a whether mild or strong green, I don’t know, but I’m hoping that March will be green and it will give some breathing space for the markets. And then of course, next financial year onwards, we’ll see where we go. So, that’s where we are on the nifty move today.

Is the market doing a Covid fall repeat? So, after yesterday’s daily bite where we thoroughly compared what sectors did in the 2008 crisis, today we are going to see the same. What lessons are we going to learn from the COVID fall crisis? Are we going there? What are the sectors that performed during, before, and after the Covid fall? And we’ll see all that data.

Where is the market headed?

Market Overview

Markets, as you can see, after a very long time, has created a closing which is above a two-day high. And, you know, this two-day high business is my favorite first indication that yes, the market wants to move up. So, if we see since the end of September, this entire while, we had one two-day high here which was immediately smashed down. Then we had one here, had one here, and one here.

So, four occasions have happened virtually where, you know, a two-day high was made, but we are still in the downtrend. But of that, at least a couple of them gave some relief rally. So, there is a big chance that we will have a relief rally and potentially go towards 23,000. We’ve already gone up like 400 points within two days. So, gradually, maybe we will go here and then let’s see whether we sharply fall down again or we try to consolidate. That’s the best-case scenario that we have right now. We’ll go from 22,000 to 26,000 like this. It is not a, you know, a potential scenario in my mind at least. Several TV channels probably think that way, that we are going towards 26, 27,000. But I think we need to create that base and then, once that base is created, then a pivotal move should happen, beating some resistance levels where one can say that a higher high is trying to be made and then a higher low gets made and we go there.

Nifty Next 50

Nifty Junior, very, very promising move, 2.5% a single day. I think this is coming after a long time. So, no complaints there at all.

Nifty Mid and Small Cap

Mid-caps also 2.5%, recovering very dramatically from the two-day low that we had. So, two and a half percent on mid-caps as well. And small caps also almost two, two and three-quarters of a percent higher than. So, there is certainly now suddenly a FOMO. Those who are perhaps sitting in cash are going to get FOMO that, you know, maybe we’ll miss the bus and, and it will periodically happen. Now, whether it will translate into a structure where we can go up or not, I think it’s too early to say that. And as I’ve mentioned many times in the past as well, that bottoms and tops are only determined when you are reasonably ahead of them. So, you know, once the market was falling, it made new lows. Only then you are able to say that yes, this was a top, right. Similarly, once some structure is going to get made, the market will move up and that will probably be at least 10-15% away from the bottom. Then you will be able to say, okay, that was the bottom. So, bottoms and tops are always made in hindsight. You cannot pinpoint them that today is the bottom or today is the top. That cannot happen on a sustained basis. So, don’t look for them as well. That is the whole point.

Nifty Bank Overview

Nifty bank up half a percent, muted versus other indices. But then, bank nifty had not fallen also just like other indices. So, this is understandable on that front.

GOLD

Gold is down 0.3% today, so it is hovering in this 86,000 mark, which is not a bad thing actually. And there’s a flag formation, the pole and flag formation that is happening where if it breaks out, I think we are going very high on that then market breadth should be good today.

Advanced Declined Ratio Trends

So, Nifty 500, 451 stocks advancing to 48 stocks declining. Nifty, 45 stocks advancing to 5 stocks declining. Then you had small caps 93 stocks to 7 in small-cap 100, mid-caps 44 to 6. So, all across the board, a very good advanced-decline ratio.

Nifty Heatmap

Bajaj Finance is the one that was dropping hard, minus 3.3% on exposure to some companies that have been downgraded. HDFC bank also losing ground in two successive sessions, 1% again gone today. Reliance made up 1% today. Infosys, TCS, Wipro, HCL, Tech Mahindra all were up. So, it was up. All autos were largely up. Tata Motors, Mahindra leading the rally along with Aisha Motors. You had cement and steel up, Bharti up. You had FMCG counters up, you had power up. So, all across the board, you had decent results.

And just look at this, a fantastic green sort of a canvas on the Nifty Next 50 space. You had fantastic gains in Adani stocks, LICDLF, Lodha, PFC, ABB, Siemens, HAL, you name it. And more or less everything was up on the day today.

Sectoral Overview

Sectoral, all green, financial services, banks, and private banks as I was mentioning are muted versus others. Metals leading the rally at 4% in a day. That’s a huge kind of move that is happening now.

There are some confusing signals that are coming. The US is saying we’re going to put tariffs on Chinese metal, so China is going to flood the other markets. If they flood the other market, then most likely that material either directly through China or through some other rerouting mechanism will come to India also. I don’t know how long will metal prices be able to sustain higher. So, that is one concern in the metal space. Public sector enterprise stocks up 3%. PSU banks also up 3%. Then you had energy stocks, defense stocks, commodity stocks all nearly 3%. Autos, real estate all going up. So, the last one week at least for most sectors is now mild red or mild green. Some sectors like capital market, autos, and media are still down by more than 2 to 8%, actually. And of course, on a monthly, 3-monthly, 6-monthly basis, nothing has changed really. Still reeling under this huge down move.

Sectors of the Day

Nifty Metal Index

Metals, as I mentioned, just look at the metal structure chart versus the larger market, which was making new lows with each dip here. For the last three dips, no new low was made and now we are challenging the high. So, this is extremely positive chart. If we are able to break out of here and go up, so this is the structure that I’m saying that Nifty needs to come down, consolidate for a few months and then start to go up. And this is exactly what metals are doing. So, maybe, just maybe metals are going to take that lead in this next cycle going forward. Just perhaps, maybe.

And that’s and, and, and that could be one reason why the structure of metals looks very different.

Story of the Day : Beware, don’t let anyone trick you into this.

In the previous episode, we discussed that we saw how sectors moved from pre-GFC to post-GFC, how things changed, how not remaining in the same sectors helped investors. And we will today study that Covid fall and see whether a repeat of leadership pre and post-Covid is happening or not.

So, the phase that we are going to consider in this is the 2015 onward period. So, there was one correction here in 2015 after the rally which started in 2013. And so, 2015-16 was a correction and then we went all the way to 2020 and then had a correction right there. So, this was a 25% move between February 15 and February 16. And in the move prior to this, so 2009, 2014, you can say autos, private banks, IT, pharma, FMCG, MNC, and services. These sectors had huge CAGRs in that five-year period. Just see while Nifty did not really do well as much as this in those periods, 18% was still quite good actually. But autos jumped up 40% in this period. CAGR basis, private banks 33%, IT 31%, and so on and so forth.

The next sort of 2015 returns were Nifty was negative 4% and you had, you know, pharma, MNC, FMCG, mild gains. But most of them were big losses. So, PSU banks which were having 14.2% CAGR loss 32.9% right there and then. So next phase here, when this rally happened, now you need to compare what was working here and what was not. What worked here? So, 11.2% CAGR in this phase of the rally from here till December 19th till right here and here you can say that the 2016-19 period, Nifty was 11% and you had private banks energy, which earlier in this phase was only at 6.7%, made 16.6% gains here. Real estate, which was the biggest loser between 2009 and 14, was making good gains in 2016-19. And services, which was net 19%, also made 14%.

The big difference here was that autos were really doing very well in the 2009-14 period. But in the 2016-19 period, autos started to really go flat. PSU banks at minus 3% CAGR here, although you were 14.2% here. Pharma, which was running at 29%, came down to 9.6% CAGR. And then there was this next phase where, you know, there was a humongous rally from December, January 2020 till December 2024. And here, of course, you can see, Sorry, this was 2019. And this from here, you can see from January 2024 to December 2024 was real estate again leading the rally at 28.7%. Here you can see very clearly central PSCs and public sector enterprise stocks gaining 24 and 25% CAGR. Whereas in the previous, this period of January 16th to December 19th, you were at minus 3% on PSU banks, 0.8% on PSCs. CPSC was minus 1.8%.

Private banks, which were ruling the charts at 17% CAGR pre-Covid, post-Covid were at 6.9% CAGR. So, you can just see that almost there is a flip of the sectors that were happening pre and post-Covid. Now, we are currently in another correction which could mark the start of another new leg once we bottom out. And we want to see what will be the leaders of the next rally. Once that rally starts, I don’t know when it will start, how long it will take. There is no way to predict that. But the leaders of this rally, the last one, are likely not to be the leaders for the next rally.

So, the cyclical performance of, you know, sectors is very, very evident. Like we saw in the 2008 scenario, like we saw in the 2015 scenario, like we saw in 2020 pre and post-Covid scenario, the sectors will change every time. So, this is like the sectoral quilt for 2016-2024. You can see here that, you know, for instance, real estate has remained in the top for three out of four years. Pharma has reasonably on the top. Autos is right here. FMCG has gone down this time. You can see perhaps CPSE and public sector enterprise also are in the top quadrant in the last few years. So, some of these industries or some of these sectors are not going to perform going forward.

Although it is very difficult to say what will and what won’t. But you can see here that, you know, there have been like, pharma was not performing till 2021 and 2022, but in the next two years, there was a complete, you know, going forward. In 2020, 2021, it was right up there. But in 2021-23, it was at the bottom half of the sectors and so on and so forth. So, this is a sort of a, the rally, the ranking of different phases, how they are moving. This has been color-coordinated so that you can see how pharma is moving, how services are moving. So, you know, maybe you can see this energy is coming down, then going up, then coming down. Then you may see, you know, central PSCs are down here. Then they are in the next few years up here. MNC stocks are here and then they were up here. You have, you know, perhaps media has always been sort of down here. PSU banks, which were sort of in the bottom half became very evident in these three years at least in the top half.

Private banks, which were ruling in 17, 18, 19, were actually, you know, reeling down in the next few years. So again, I mean, very, very rough idea. I mean, there is no exact signs that, you know, which three sectors are going to perform. But most likely than not, those that have been performing very well in the last few years are not going to be those. And perhaps if I were to see those, maybe PSU banks, maybe central PSEs, maybe defense stocks, these kinds of stocks perhaps will not be the ones that will be going forward or leading the mental going forward. There could be a completely different set of private banks could be leading the next few years. FMCG could lead because FMCG has been in the doldrums in the last few years. Commodity stocks have been down, they could be leading the next few years.

So, strategy has to be such that it automatically lends itself to be invested in the new sectors that are coming up. And you never know, maybe sugar may start to go up, cement may start to go up. Those micro, sort of more, you can say smaller sectors which we have not included in these classifications can also become huge. Paper stocks can start to go up. So, the strategy has to be capable of exiting past leadership, entering new leadership and staying nimble and dynamic in their approach towards and agnostic towards the stocks and sectors that we are going to pick. The more we fixate ourselves that no, I want to buy this sector only, I want to buy this stock only, the more constraints we are putting on ourselves that the stock or the sector has to perform.

Why should we have that constraint when we can, you know, ride with the new winners. Whatever be there, if new winners are in a particular XYZ sector, let’s go with that. If ABC sector is not performing, let’s not go with that. Why should we constrain ourselves and fixate ourselves to those sectors? Is the moot point that we are trying to make here?

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