The WeekendInvesting Newsletter

Another brand new initiative from our Research Desk is The WeekendInvesting Newsletter. This is a daily newsletter that summarizes all the stories we cover during the day(market nuggets), including the daily byte that we shoot every evening. This newsletter will be delivered to your email every evening on market days, providing you with a wealth of market-related information. The newsletter includes both summaries and long-form blogs for all the market nuggets covered. These blogs are also linked to the videos we shoot, so you can choose to watch or read the content according to your preference.

Check out our past newsletters.

From the Research Desk of WeekendInvesting

Nifty is a Momentum Index

The National Stock Exchange recently released an infographic about the upcoming Nifty index rebalancing. It’s an important event that happens twice a year, usually in March and September. This process is essentially a way to keep the  . . . .

One indicator is not enough

Many investors might assume that a high RSI guarantees a market fall, but that’s not always true. The BSE Sensex has shown periods where the RSI remained in the overbought zone for . . . .

China is De-Dollarizing !

Recent data from China customs reveals a significant shift in China’s export strategy. Over the past two decades, China has steadily increased its share of exports to Africa and Latin America. This growth is represented by a green line that shows a consistent rise in China’s export share to these regions. Meanwhile, North American exports have been . . . .

Natural long term cycle of sectors

One of the key insights from the ACWI is how the market cap of different sectors has shifted over the past 30 years. For example, around the year 2000, sectors like technology, telecom, and healthcare dominated the global market, making up 44% of the total market cap. However, by the time of the Lehman crisis in 2008, this percentage . . . .

What should be the real rate now ?

When we look at the historical data, there is a strong correlation between gold prices and real interest rates. In the past, as real interest rates moved, gold prices followed closely. For example, from 2011 to 2021, when real rates were between 0% and 1%, gold prices  . . . .

Is Defense the sector for the decade ?

One of the most consistent sectors in the U.S. stock market over the past 35 years has been aerospace and defense. This sector has seen a compound annual growth rate (CAGR) of 12%, outperforming the S&P 500, which itself has yielded a 10% CAGR. Many might assume that industrials would outpace aerospace and defense, but this chart from Bank of America proves otherwise . . . .

The coming crisis of K shaped recovery

The recent performance of Dollar General, one of the largest dollar store chains in the U.S. and other countries, highlights a concerning trend. These stores offer products at extremely low prices, targeting those in the lower economic brackets. However, recent data shows that . . . .

When would you exit ?

Walgreens is a well-known pharmacy retail chain in the U.S. and globally. However, its stock performance tells a different story despite its strong market presence. Over the years, the stock has faced a significant decline, possibly due to increasing online competition, although the exact reasons remain unclear. From 1996, Walgreens’ stock rose steadily from around $10 to $40-$50, but then  . . . .

Gold supply is getting overwhelmed by demand.

People often wonder why there is so much focus on gold. While it may seem like gold is constantly in the conversation, it’s actually just a fraction of the content. However, the reason gold keeps coming up is simple: it’s a highly undervalued asset, and many people are underexposed to it. Gold serves as . . . .

Are we in a different world now ?

A recent analysis shows a significant shift in the distribution of market capitalization among the top 10 companies in the S&P 500. Traditionally, the top ten stocks have held about 26-27% of the total market cap over the past 30 years. However, in recent years, this figure has jumped to nearly  . . . .

WeekendInvesting Specials !

Markets to Crash during Rate Cuts ?

Markets this week

It was quite a dramatic week towards the end, with a notable sell-off in the U.S. markets, particularly on Friday night after the jobs data release. The data indicated that the economy is weaker than expected, which suggests that rate cuts may be on the horizon. However, the market is sensing a potential weakness going forward. How the Indian market will react in the short term is anyone’s guess, but the longer trend looks very robust.

Previous instances of global weakness have been handled well by the Indian market. Currently, we are just a couple of percentage points away from the all-time high, so there’s little concern on that front. The broader market, especially mid and small caps, also appears resilient. There has been some churn within certain sectors, particularly in defense, public sector banks, and public sector enterprise stocks, where some have cooled off, but overall, the market doesn’t seem too bad at this point.

Looking at the Nifty this week, the first two days were focused on trying to rise, but the latter part of the week saw a collapse. The gap in the chart has been closed, but there are more gaps visible if we take a longer weekly view. This is the first weekly bearish engulfing candle we’ve seen in quite some time, which may indicate a further downward trend. If the weekly low is broken next week, there’s a possibility that the downward trend will continue. The first pivotal support lies just below 24,000, and the major support may come around 21,200, which was the bottom during election week. In case of a severe market downturn, we could test that support level. These are key mental points to consider for a potential bigger correction in the market.

Benchmark Indices & WeekendInvesting Overview

Nifty 50 lost 1.5%, CNX 200 lost 1.3%, and both Nifty Next 50 and CNX 500 lost 1.1%. Small caps, however, managed a small gain of 0.8%. Among the Weekend Investing strategies, Mi 25 bucked the trend with a 1.1% gain, HNI Wealth Builder rose by 0.3%, and Mi ATH 2 inched up by 0.1%. The rest of the strategies were in the red, with Mi India Top Ten and HNI Capital Compounder each losing 2.4%.

Sectoral Overview

Defensive sectors like FMCG, consumption, pharma, and IT were hit the least, with pharma down only 0.08% and IT down 1.3%. For FY 25, these sectors have led in performance compared to others. On the other hand, PSU banks took the hardest hit, down 4.7%, followed by public sector enterprise stocks (-3.8%), energy stocks (-3.5%), autos, infrastructure, commodities, and real estate, all of which lost 2% or more. High-beta sectors have been hit harder, while defensive sectors experienced relatively lesser damage.

In terms of sectoral momentum over two weeks, one month, three months, and six months, pharma, IT, and consumption are leading. There’s been a shift from sectors like real estate, energy, PSU banks, and public sector enterprises, which were running earlier, to pharma, IT, and consumption. In the short term, real estate and financial services are trying to make a comeback, but their overall ranking remains low. PSU banks are now ranked the lowest among tracked sectors, with energy close behind.

WeekendInvesting Strategy Spotlight

Mi EverGreen’s Price is going up !

The spotlight is on Mi Evergreen, which will see a price change. The inaugural pricing was initially set for a year but has now continued for over two and a half years. From 10 September 2024, the strategy will revert to its intended price. Until 9 September 2024, new subscribers can still lock in the old price, and auto-renewal at the old price will continue as long as subscriptions remain active. Existing and new subscribers won’t be affected by the price change unless they cancel their auto-renewal and return later.

Mi Evergreen is a well-loved strategy, known for its conservative approach. The stock universe comprises the top 200 stocks, with a slower churn as the portfolio is reviewed only once a month. A fixed allocation to a gold ETF provides stability during market volatility. The strategy allows winners to run and resets to equal weight each month, making it an excellent core portfolio. The portfolio includes large-cap stocks (the top 100) and mid-cap stocks (101st to 200th positions).

The strategy is rotational, investing in 20 equally-weighted stocks, with 25% allocated to gold ETFs. The strategy is reviewed and rebalanced monthly, with a few stock changes possible. The recommended capital is ₹5 to ₹30 lakhs, with a suggested investment horizon of four to five years.

The reason for recommending a four to five-year view is that market trends or rallies might not occur immediately. If you’re fortunate, you may catch an uptrend early on, but if not, you may have to wait a few years. The last four years have been unusual, especially since COVID-19, with many new investors thinking that quick gains are the norm. However, this is not sustainable in the long run. Natural market cycles usually have at least one large uptrend within an eight-year period, and the goal is to capture this when recommending a five-year investment window for this strategy.

Rebalance Update

We give advance notice here on the upcoming changes in your smallcase for Monday. This advance notice can be used to ignore Monday’s update if there is no change. If there is a change indicated you can use the smallcase app or log in to weekendinvesting.smallcase.com to see the rebalance. A backup email is sent by mid-day Monday if you have not rebalanced by then and yet another one a

Note: We are not including LIQUIDBEES as an ADD or an EXIT count.

WeekendInvesting Strategies Performance

WeekendInvesting Products – LIVE Index Data

Many of you had asked us to make the index series of all WeekendInvesting Products available so that you could perform your own analysis and studies. You can find a link to the LIVE sheet here and also on the HUB under the support column in the content tab.

Check out M Profit

Disclaimers & Disclosures

That’s it for this week. See you in the next week’s edition