Hello and welcome to the Weekend Investing Daily Bite of 11 September, a topsy-turvy day again. After some mild push-up yesterday, this morning also felt like markets were going higher. But then towards the middle of the day, the market did a U-turn and completely collapsed. As I was mentioning yesterday, the markets are in no mood to go anywhere. We are just bobbing around 25,000, which is not a bad thing. I mean, we can’t be expecting to go up every week, every month, or every half a year. There will come periods where just time consolidation will happen, and we have not yet even started that. I think we are still very much in the upward trajectory phase. Maybe post the next quarter, once the US elections are done, and once the festive season is assuring us of continued growth or not, that may be a fulcrum on which the markets may look towards the next few months or next few quarters. No harm done, but it is just a consolidation kind of move.
The IT sector, however, is making some kind of a comeback. We will discuss how sectors have rotated in the recent past and in the longer term, and how you should be looking at sectoral rotation.
Market Overview
Where are the markets headed? Again, this is a multiple number of attempts at 25,000. So if this line is nearly 25,000, we had one attempt at the beginning of August, after which we had that crack. Then you had another attempt here, a third attempt here, and then another one, fourth here, and then fifth here. All these 25,000 and above attempts are failing. There are some sellers who have decided to sell every time the market comes to 25,000, and that’s fine. The market knocks at certain levels, round figures mostly, for a certain period, and then it just breaks out and goes much higher than that. So that phase is yet to come. It may also happen that we may consolidate between 23,800 and 25,000 for some time. That is also possible. And if there is bad news, you know, we can possibly even come down to 22,000-23,000 levels, which is not out of the realm of things. So having the right expectation is important. A 10-15% kind of market move is very normal at any point in time. So at 25,000, if 10-15% would mean, you know, maybe 2,500 to about 4,000 points. So anywhere between 21,000 to 25,000 is your normal operating range, I would say. And then the crisis can start if it goes there.
Nifty is down half a percent
Nifty Next 50
Nifty Junior is also down half a percent. Same situation: it went up but could not reach the previous high point, with a lethargic move here.
Nifty Mid and Small Cap
Mid caps gave up a quarter percent but are again hanging very near all-time highs. So no problem here. Small caps also lost 0.78%, with somewhat of a bearish engulfing pattern again here. I think the support will again get tested near 18,000 soon if this comes down. So, nothing much to really report on a day-to-day basis in such markets.
Nifty Bank Overview
Bank Nifty is again just where we were on 1 June. We are just here and there on that, so no significant moves to point out.
Advanced Declined Ratio Trends
Advances and declines: Advances were nicely up in the morning, and declines were small. But towards the end of the day, we had 348 declines to 150 advances. Declines from 0-2% actually took over, so mild declines across different segments of the market. The good part, if we see, is that FIIs over the last many days are continuously pumping in money, and domestic institutions are somewhat slowing down their purchases and on certain days even selling off some. Overall, if we see institutional net-net, there has been buying. If you combine FII and DII cash, there has been net-net buying across the board, barring a few days where it was negative.
Nifty Heatmap
Heat maps were virtually red. Tata Motors, on some analyst report, lost 6%. I think Goldman Sachs or somebody mentioned that it could be 20% down, and these heavyweight analysts have a lot of impact on market sentiment. When they announced that this could be down 20%, people will blindly just sell off. ONGC was also down 3.48%, and BPCL down 1.65%. Crude is hovering near $70 at multi-year lows, which is very good news for India from the front of the foreign currency issue, the fiscal deficit, the trade deficit. But the point is that the government should now cut back on petrol and diesel prices. Now that crude prices are at multi-year lows, a 10-15 rupee cut here will really give a very big boost to consumption. But unfortunately, tax is like an addiction. Once the government starts to receive tax on something, it is very difficult for them to give it up. It is almost like salary. I’m sorry if that sounds a bit mean, but that’s how it is. It’s like money coming in every month. Very recently, in fact, they’ve stopped gloating about the kind of GST collection that they have because it sends a very negative impact. I mean, you are charging the public, of course, for public good only supposedly, but you don’t have to rub it in that “we got 1.8 lakh crores from you this month.” So I think they are understanding that. But I think this will be a very good step if they cut back on taxes, releasing some taxation margin to the user. Even a five to ten rupee cut on petrol and diesel will go a long way in boosting the economy.
Bajaj Auto did very well, up 3.94%, a lone wolf out there. Asian Paints, ahead of Diwali, always perks up, plus 2.2%. A host of other stocks gave up. State Bank of India, if you recall, three or four days ago had dropped 4%, and that was a good sign that banks are leading the market down. And that is exactly why State Bank of India has again fallen. Whenever you find State Bank of India up or down, you will find the rest of the market likely to be in a similar direction. This is like the leading indicator for the Indian economy, so this more than any other stock gives a directional view of the market.
Nifty Next 50 was a mixed bag but with a lot of red as well. PNB, Canara Bank, REC, PFC—all public sector orientation. HAL, IOC were down, as were some privates like VBL, Zomato, Naukri, Havells, and Berger Paints. These were the ones that stood out on the green side. Vedanta, IOC, and Motherson lost quite a bit on profit-taking today.
Sectoral Overview
In terms of sectoral trends, FMCG, consumption, pharma, and IT are at the top. IT is giving a very clear indication, as I have been mentioning on a daily basis, that the risk-off trade is happening. People are moving money into safer, more defensive sectors and withdrawing money from PSU banks, public enterprise stocks, energy, commodities, metals, autos, and real estate, which are higher risk, even higher beta segments, so to say. There is no place to hide, but these defensives will probably fall a bit less than these in a market fall. In the last week, only these four defensive sectors—FMCG, consumption, pharma, and IT—have managed zero or plus green moves. Otherwise, everything is negative. So it is a very clear picture of how that shift is happening, and that is a very good indicator that the market is not going to run away likely soon, because whenever markets have to run away, these sectors will start to perk up in a very big way, and these will take a backseat.
Sectors of the Day
Nifty PSU Bank Index
PSU banks are now breaking down virtually from the bottom that was made in February 2024. It is absolutely not a great sign. It is a crooked head and shoulders pattern also. This 6400-6600 range, I think, is crucial. If we are not able to hold here, there can be further damage. Most banking stocks are looking at that kind of damage.
Stocks of the Day
Prism Johnson
Some news of a land sale is happening in Prism Johnson, so two days of gains: 19% yesterday, 11.7% today. An amazing kind of re-rating of this stock happened in just two sessions.
Story of the Day
Coming to the sectoral story, the IT sector has made a big comeback. If we see the larger picture from, let’s say, the Covid bottom till December 2021—so one and a half years or so—you had metals and IT doing really well in that approximately 18-month period. FMCG was not doing so well compared to metals and IT, and CNX Finance and Nifty were sort of in the middle here. So that was the picture for about 18-20 months. But then, from January 2022 onwards, public sector enterprises and public sector banks took the lead and became 100-180% gainers, while IT was almost flat at 10%, and Nifty was at 44%. So you see just 18 months or so here, maybe even more—21 months here—and approximately 30 months here, with a very different set of rotations. Earlier, IT was doing really well, but in the last 21-22 months, PSUs and PSU banks have been doing well. So you can never really say which sector is going to take leadership, but when it does, it stays for quite some time. Similarly, PSU banks and PSU enterprises are now falling. They were the ones who were doing well here. Metals have now started falling and are giving up their gains. And IT, which was doing well here, fell, but now again, it is starting to move up. So these moves can last quite a bit of time. So, some reallocation if you are thinking about doing should be on the anvil.
The charts for these, again, there is no great sign here. I was talking about this gap in March-April, where IT stocks fell. We have come into this gap, and maybe some resistance may start to play out here. Similarly, in the public sector banks, this sideways consolidation at a lower level is not a great sign. Nifty is also struggling at the highs. So I think, time-wise, we may just go sideways. The good thing is that markets don’t have to always go down to make corrections. They can correct over time, and after correcting for time, they can again start moving up. So if you’re not very aggressively trading, just staying with the larger trend may help you.
For today, Nifty Next 50 lost a little bit more, 0.42%. IEX on good volumes and Glenmark Pharma were strong. Zomato gave up all its gains, and Lupin is somewhat rolling downwards on profit-taking. REC and Berger were the others on the downside. IEX has really bottomed out and is now rising very nicely, so all eyes are on it. Today’s best-performing stock was ONGC, up 5.35%, with Glenmark Pharma up 2.5%. The biggest loser was ONGC, down 3.48%, followed by NTPC and BPCL.
