Weekend Investing Daily Byte – 12 Feb 2024

5 min read

How are the Markets Looking ?

In the world of investing, February 12th marked a day of significant challenges, particularly evident in the performance of the Nifty, which saw a dip below a crucial support level, closing at 21,600. This represented a decline of approximately three-quarters of a percent, signaling a day of tough trading for investors. The market is currently in a congestion zone, with boundaries set at 21,200 on the lower end and 22,100 at the upper. Such conditions suggest a period of uncertainty, with potential moves either upwards towards 22,000 or downwards to around 20,000, depending on market dynamics in the coming months.

The potential factors that could sway the market into further volatility include major international news or unexpected turns in domestic political events, especially those related to upcoming elections. These elements can profoundly affect market sentiment, underscoring the importance of staying informed and prepared for shifts in the trading landscape. Despite these challenges, it’s crucial to remember the strides made since last October. The market has experienced considerable growth, and some level of consolidation and correction could be considered a natural and healthy part of its cycle.

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Nifty Heatmap

The day’s trading saw a particular hit to public sector banks and enterprises, with significant losses also in the FMCG and energy sectors. Conversely, IT and pharmaceutical stocks managed to find some respite, standing out as green spots in an otherwise red heatmap. This performance highlights the defensive nature of these sectors, even when traditional safe havens like FMCG falter under market pressure.

Hindustan Lever, ITC, Reliance down. HDFC Bank I think is now at a year and a half low. State Bank of India, ICICI Bank, Kotak Bank down. Tata Steel, NTPC, and Coal India, ONGC, BPCL, all these stocks were hammered like nobody’s business.

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Sectoral Overview

4.4% down on PSU banking in a single day. That’s a huge cut. Public sector enterprise also down 3.8%, a huge cut. Real estate down 3%. Amidst the downturn, there was speculative talk regarding the recent launch of a PSU fund, which might have contributed to the market’s fluctuations. While these remain unconfirmed rumors, they serve as a reminder of the market’s sensitivity to news and investor sentiment. Moreover, the day ended with a stark reminder of the volatility across sectors, with energy, metals, and commodities witnessing more than a 2% drop, painting a long red line across the market heatmap.

Mid & Small Cap Performance

For the mid caps, this is the third largest drop since the October bottom. We don’t expect the Feb consolidation to go so easily, so maximum could be 17,000 at this go and then there should be a bounce.

Smallcaps are also breaking down from this trendline so the fall is steeper in the current correction than in the previous corrections. It could be a false breakdown today or it could take support at 14,000.

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Nifty Bank Overview

Nifty bank remains quite weak, is almost a bearish engulfing candle on the daily. After having dropped down from this support, it went back and retested it and it’s coming back now below 44,500. A sharp move down towards 42,000 is also not ruled out. So, bank Nifty is definitely weak versus a lot of other sectors

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Highlight – Nifty Energy

Nifty energy, down from 39,500 to 38,000. So again, a few percentage of cut there

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Highlight – Nifty PSE

Public sector enterprise stocks also have given up some four or 5% gains so far. Some of the public sector enterprise stocks like NHPC, RVNL, Oil India, they were hammered really badly. And the way they have gone up, I guess corrections will be sharp.

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Highlight – Nifty PSU Bank

PSU banks, despite giving up the gains of about five to 6%, still is up quite dramatically in the last two-three months.

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Highlight – Nifty Realty

Nifty real estate giving up some of the gains. But again, the gains that have been given up are not so significant. They have come a long way in the last six to nine months.

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Highlight – Nifty IT

Nifty IT was a lone green star in the various sectors still hovering around its previous highs.

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But what one can say is that as long as you have a proper strategy in place, you need not worry about it. Sooner or later, if the stock remains weak, they will get out. Yes, sometimes you will get hit more than what you were expecting, but then at most times you’re getting more rewards than what one is expecting also. So, that’s part and parcel of the game

I still think these cuts are not significant enough that we start to worry in the market. I think these are mere corrections. As I was discussing in a video on the weekend investing app today, these small caps have not even corrected 25% of the recent highs. So, a Fibonacci 38% correction or even a 50% correction sometimes is not out of the ordinary in terms of how gains get consolidated over a period of time. Take it with a pinch of salt that two steps forward and one step back is the way the market moves. And that’s how it is moving. Stick with the strategy. And we’ve seen that sticking with the strategy, with discipline, always yields great results.

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    Weekend Investing Daily Byte – 12 Feb 2024