Where is the market headed?
Contrary to expectations, the market did drop a bit, but only in stocks which had run up quite a bit yesterday. Yesterday, the gap up caused a lot of stocks to move up very, very rapidly and significant profit booking only came in those stocks. Stocks that had been rising even earlier continued to rise, resulting in a very mixed bag signal from the market where some stocks are really flying and others were completely under pressure.
Let’s look at some of the charts, and please do read the disclaimer. A chart from Bar Chart provides a global measure of what cash is doing in US markets, showing that investors are rotating to cash at one of the fastest paces. It is well known that when retail investors move into cash, that probably signals some sort of bottoming out as well.
This is possibly a good sign for global markets, indicating that while investors are very nervous, there can potentially be a bottoming process in place right now. While things always look really bleak, markets often climb on walls of worry. Nobody can really pick the exact point where the bottom will happen or how the markets will rise.
Market Overview
If you look at the Nifty chart, Nifty had a very tight range yesterday after a huge gap up. Today, it did come below yesterday’s low, but the range remained very tight even today, ending at minus 0.93% from yesterday. There is no real harm done so far, and the short-term outlook remains bullish on the markets in this scenario.
Nifty Next 50
Nifty Jr., on the other hand, did correct but closed higher at 0.19%, which is very positive.
Nifty Mid and Small Cap
Mid-caps were also up 0.27% and Small-caps were up 0.13%.
Bank Nifty
However, banking stocks were down, giving up pretty much yesterday’s range at minus 1.58%. This occurred because yesterday saw an exhaustion gap of almost 3% or 4% following three days of gain. The market may consolidate here, but it is unlikely to fall flat on its face just based on geopolitics. There are some concerns as crude oil has moved up again, reaching 98 after being near 90 yesterday.
GOLD
Gold is flat.
Crude Oil
While there is some correction from the sharp fall in oil, it does not mean it will go straight back up unless ceasefire talks break down. The first round of talks is on Saturday. The US Army and US Air Force are staying in the region until an agreement is in place. The sense is that while the US is posturing hard, it has probably decided to get out of the region, leaving local issues to regional players like Israel, Iran, and Lebanon.
Advance Decline Ratio
The advanced decline trends were not bad at all, with 222 advances to 277 declines, which is fair after a huge gap up day.
Heat Maps
Most losses came from stocks that were flying hard yesterday. HDFC Bank was up 5% to 6% yesterday, and State Bank, LT, and ICICI Bank also saw significant gains before these corrective moves.
In the Nifty Next 50 space, DLF, Ambuja Cements, Indian Hotels, and Canara Bank moved off a bit, while gains were seen in Vedanta, Hindustan Aeronautics, Torrent Pharma, and PFC.
Movers Of The Day
In the movers of the day segment, Ola is going bonkers, quickly scaling from nearly 22 or 23 rupees to 36 rupees due to an announcement regarding lithium cell capacity creation.
HFCL was also up 6% after its subsidiary bagged a big optical fiber order.
Sectoral Overview
Looking at sectoral trends, the market is evenly matched. Private banks, tourism, banking, financial services, and PSU banks were all down 1% to 2%. Meanwhile, defense stocks, capital market metals, CPSE, PSEs, and energy stocks were all up 0.8% to 1.56%.
Sector of the Day
Nifty Capital Market Index
The capital market segment provides a lot of optimism, being up almost 10% on a one-week basis. Over the last month, the capital market is the best performing sector at plus 8%, while real estate is up 10.6%. When capital market stocks like Angel one, Anand Rathi, ICICI Prudential, Bullion Brains, and BSE are gaining 3% to 5%, it suggests the markets are not in a weak spot. This leading bounce suggests the market has perhaps bottomed.
Nifty Private Bank Index
Private banks were down today about minus 2% across IndusInd, HDFC, Kotak, and ICICI, with RBL Bank down 1.3%, but this follows a big jump yesterday and appears to be a small corrective move.
U.S. Market
In the previous session of US markets, all indices were up significantly by 2.5% to 3%. There were very nice gains in Meta, Amazon, Walmart, Google, ASML, MU, AMD, Intel, and AVGO. Some of these stocks could be part of the Weekend Investing stock strategy. Conversely, Palantir dropped 6.2% and Tesla continued to drop very hard.
Tweet Of The Day
In the tweet of the day segment, consider a case study of an investor who worked for Adobe. He held a good position through stock options, leaving the company years ago. The stock went from 60 dollars in 2015 to almost 700 dollars, a 12-fold increase in 10 years. After peaking at 700 dollars in 2022, it came back to nearly 250, went back to 600 plus, and is now down to 239. The investor is understandably disturbed by this concentrated position.
This highlights a commonplace dilemma: should he sell, add, or hold? A stock that went up 30 times from 2011 to 2021 is now perhaps mean reverting. At what point should a fundamental investor exit? Nike is another example of a leading brand sitting at a 10 to 12-year low. Investors face this often in conventional fundamental investing. You need to figure out how and when you will exit even before you buy, establishing conditions—whether technical, fundamental, earnings-based, or market share—that will trigger an exit regardless of emotions.
