Weekend Investing Daily Byte – 10 July 2024

July 10, 2024 5 min read

A bit of volatility hit the market today. The market was down sharply in the first hour but recovered. The reason for the fall could be attributed to the RBI scare that happened this morning. I’ll talk more about it towards the end of the session, but the reason could be anything. The market was looking for a fall, and usually, when markets are a bit overbought or stressed on one side, any single excuse can become the reason for a fall.

Market Overview

You can see very strong support coming in. There was a gap at this point, and almost the gap was fully filled and recovered. Nifty closed down less than half a percent. In the interim, it had come down to much below 24,150—24,141 to be precise—and then recovered back almost 200 points in the second half of the day. So, the Bears are really not getting any opportunity to make any money. Since June onwards, after the election fall, there hasn’t even been a couple of hundred points proper fall over a few days. These kinds of falls that we were seeing in March, April, and May, where at least the falls used to stick for five, six, seven days, are not happening right now.

It is a bit of a stretch. In a natural, normal market, corrections happen from time to time, but right now that is not happening. Maybe the budget being not so far away is causing sharp buying at every dip, not allowing even a 2% or a 1% fall properly.

Nifty Next 50

Nifty Junior: Sharp fall and recovery during the day.

Nifty Mid and Small Cap

Nifty Mid Caps: Recovering from the top of this consolidation range, closing only 0.3% down.
Small Caps: Losing only 0.7%, taking support at this point. No major damage done.

Nifty Bank Overview

Bank Nifty: Down a bit. The weakest link in the market for the last ten sessions, but not too bad overall.

Nifty Heatmap

Autos: Mixed performance. Maruti and Tata Motors stable, but Mahindra and Mahindra slipped 7%. Some signs of slowdown in auto pricing power.
Steel and Cement Stocks: Performing well.
FMCG: Strong performance with Asian Paints up 3%.
Consumption Stocks: Focus shifted to FMCG after the morning fall.

Sectoral Overview

In terms of sector performance, autos showed mixed results. Maruti and Tata Motors remained stable, but Mahindra and Mahindra slipped 7%. There are some signs of slowdown in the auto sector’s pricing power. Steel and cement stocks performed well, and FMCG showed strong performance with Asian Paints up 3%. Consumption stocks saw a shift in focus to FMCG after the morning fall. Maruti benefitted from the Uttar Pradesh registration tax abolition for hybrid vehicles, while Mahindra and Mahindra was down 6% due to price cuts in the XUV 700 and signs of a slowdown in the auto sector. Shopper Stop was a standout, up 16.8% and reaching long-term resistance.

Sectors of the Day

Nifty PSE Index

Public sector enterprise stocks almost reached a three-day low but then fully recovered. However, they have yet to break out of the election high, making this one of the last sectors where the election day high has not been taken out. In contrast, most sectors have already surpassed their election day highs.

Nifty Auto Index

The auto sector, which had been performing well, experienced a shake-off today and might need more consolidation. The auto space was down 2%, with Mahindra and Mahindra down 6% due to a price cut on their SUVs and consolidation over the past month. This fall may lead to deeper consolidation and distress among competing SUVs. Additionally, Uttar Pradesh’s hybrid car registration and road tax waiver will cause distress in non-hybrid cars and non-UP-based vehicle sales.

Stocks of the Day

Shopper Stop

Shopper Stop saw a significant increase, flying high at 16.8%, marking the highest gain in a long time. On a long-term chart spanning almost 14 years, the stock has again reached a resistance line, potentially at the cusp of a significant move beyond it.

Story of the Day

This morning’s market scare stemmed from the RBI raising concerns about banks having accounts used for fraud and evergreen, as mentioned by Deputy Governor Mr. Rao in his speech. Whenever a regulator mentions fraud, the markets react strongly, causing the morning sell-off. However, the fall could be attributed to any excuse, given the market’s stretched state. The good news is the market’s rapid recovery, indicating strong internal liquidity and investor confidence.

New and naive investors should not panic and liquidate their positions during such blips. If you are invested for the long term (five, seven, or ten years), these are just minor setbacks. Instead of getting out of the market, consider sector rotation and staying with the strongest sectors. Avoid timing the market; it is better to stay invested and make sure your portfolio is diversified with allocations in other asset classes, especially gold, to smooth out overall performance during geopolitical issues.

The market may remain volatile, especially around the budget. Post-budget, there could be tax updates or other triggers leading to shakiness. However, this is part of the market journey. Stay invested, avoid hasty decisions based on short-term movements, and enjoy a rewarding investing journey.

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    Weekend Investing Daily Byte – 10 July 2024