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Today’s video will focus on whether the bears will have the upper hand in January 2025. We’ll also delve into a statistical analysis of January trends from the past two decades.

Where is the market headed?

Market Overview

The Nifty was up by 0.41%, but it was a bit volatile, opening at 23,600, dipping to 23,500, then rising to 23,800 before closing around 23,700. The last seven sessions have seen the market moving within a broad range, and there’s been no breakout in either direction. This suggests more consolidation in the near term before a big move could come. Whether that will be a recovery back to recent highs or a breakdown below 23,250 remains to be seen.

Nifty Next 50

The Nifty Junior was also up by 0.38%, appearing reasonably stable for now. However, the intermediate and mid-term trends still seem to be downward.

Nifty Mid and Small Cap

On the other hand, mid-cap stocks had a better performance today, with the index up by 0.5%. It broke out of the range seen in the last six sessions and closed higher. Small caps, however, are showing more aggressive momentum, up 0.88%. In just two sessions, the small-cap index has recovered from a low of 17,908 and seems to be performing better than the larger indices.

Nifty Bank Overview

Bank Nifty also gained 0.4%, though the day’s price action was volatile, with a top-to-bottom range of nearly 800 to 900 points. Overall, the market is still moving sideways without clear direction.

Advanced Declined Ratio Trends

On the momentum front, there were 331 advances compared to 163 declines, which is a positive sign. It looks like the market is slightly biased towards long positions in the Nifty space.

Nifty Heatmap

In terms of individual stocks, the auto sector had a strong day, with Tata Motors, Mahindra, and Maruti leading the way. Other stocks that did well included L&T, Bajaj Finance, and HDFC Bank. On the downside, Wipro, Bajaj Auto, ONGC, and Grasim saw some losses, but there were no significant losers. Trent, however, lost 0.8% in the Nifty Next 50 space. In the broader market, capital goods stocks like Siemens and BHEL saw gains, as did some stocks from the consumption and pharma sectors, including Varun Beverages, United Spirits, LTM, TVS Motors, and Torrent Pharma.

Sectoral Overview

Looking at sectoral trends, autos were the top performers today, leading the rally for a change. Autos have had a good week, and they’ve been a top performer over the last month as well. Real estate stocks took a step back, down 1.1%, while energy stocks rose by 0.7%. Consumption stocks gained 0.6%.

Sectors of the Day

Nifty Auto Index

The auto sector in particular seems to be consolidating and building a base for the next move up, after a rough patch since mid-September. Pharma remains strong, with a 39.2% return over the last 12 months.

Stock of the Day

Adani Green

Among stocks with the lowest momentum score, Adani Green Energy stood out. This stock performed well from 2019 to 2022 but has since seen a sharp decline from nearly 3,000 to around 1,400, and briefly even dipped to 450 in 2023. This demonstrates the importance of tracking momentum in your portfolio—stocks that underperform should be replaced with better-performing ones. Since May 2022, Adani Green has lost 51.8%, while other large-cap stocks have shown gains. Momentum strategies help you stay aligned with the stocks that continue to perform well.

Story of the Day : Will the bears have the upper hand in January?

The past quarter has seen three consecutive months of negative returns—October, November, and December. Historically, after three or more consecutive negative months, markets tend to rally, often leading to a green month. This pattern suggests that there could be a relief rally between January and March, especially after such a prolonged downturn.

Looking at January performance over the past 33 years, we’ve seen a wide range of outcomes. In some years, like 1992, January saw a 22% gain, while in others, like 2008, it was down 16%. On average, January has seen a return of 0.71%, with 15 positive months and 19 negative ones. There have been 18 instances where January saw a gain of more than 8%, and 18 times where it lost more than 6%. The data shows that January can be highly unpredictable, with both strong gains and significant losses.

The five-year average return for January is negative, with an average of -1.4%. Additionally, the FII data for the past 10 years shows a pattern of heavy selling in January, with the last three years seeing FIIs sell 33,000 crores in 2022, 28,000 crores in 2023, and 25,000 crores in 2024. Given this trend, it’s difficult to predict a complete reversal of that selling in January. However, a lesser sell-off is a possibility.

Looking ahead, several factors could shape the market in January. Issues like tariffs under Trump’s peak, global shifts towards US assets, a stronger US dollar, and pressure on the Indian currency could weigh on the market. Additionally, there’s a lot of anticipation surrounding the upcoming budget, and the Finance Minister’s announcements on February 1st could serve as a pivot for the market—either pushing it lower or causing a sharp rally.

In summary, seven out of the last ten years have seen negative returns in January. FIIs have been heavy sellers for the past few years, and the five-year average is also down. Given the current global and domestic economic pressures, January may be a challenging month to predict. My personal sense is that we’ll see a muted January, with the budget announcement potentially being the key factor that drives the market in either direction.

What do you think? Where do you see the market headed in January? Let me know in the comments below.

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