How are the Markets Looking ?

Today is February 15, 2024. It’s been a good extension to the market, albeit not a great day overall. The Nifty experienced a Doji candle, indicating that its opening and closing prices were very close. However, it’s worth noting the continuation of recovery from the recent market slump, during which the Nifty lost approximately 6-7%. This recovery has been ongoing for a few days now. Today, the Nifty managed to shake off early tests and closed around the 21,009 level, marking a gain of about 0.3%. A key point of interest is the resistance at 22,000, which has been tested unsuccessfully by the Nifty in recent sessions. Despite these challenges, the higher low pattern persists, suggesting resilience in the market.

In terms of technical analysis, the 50-period moving average and the RSI have been important indicators. The RSI, in particular, has shown divergence, indicating potential market consolidation.

Nifty Heatmap

The heat map reveals standout performances from specific banks and sectors, with HDFC Bank and State Bank of India posting notable gains, while other banks and sectors had mixed results. The energy sector, highlighted by BPCL’s strong uptrend, and Mahindra and Mahindra, as the day’s best performer, have shown significant strength.

Sectoral Overview

Sectorally, PSU banks and public sector enterprises have shown remarkable performance, with energy, auto, and commodities sectors also posting gains. On the other hand, the pharma sector remained neutral, and the FMCG sector saw a decline. Midcaps and smallcaps have demonstrated resilience and are on the verge of making new all-time highs, showcasing a strong recovery from recent corrections.

Mid & Small Cap Performance

Nifty Bank Overview

Nifty Bank, however, remains below its 50-period moving average, struggling to break out of its choppy trading range. Despite a gain today, its performance in 2024 has been less than stellar, with a notable correction from its peak.

Which stock deserves to be in your portfolio?
Case Study : Zomato

Zomato is a name that has garnered immense popularity, especially around its IPO and listing phase. The buzz was palpable as it kicked off its journey in the stock market at around the 110-115 level, and impressively, it surged to clock gains of 30%. Imagine you’re someone who keeps an eye on the stock market, surrounded by chatter about Zomato and the elation of those who secured their IPO allotment. Suppose you weren’t as lucky to get the allotment, leaving you feeling left out. Watching the stock’s performance keenly, you might feel the urge to jump in and buy, fearing you’ve missed out on a golden opportunity.

However, it’s crucial to exercise patience and ensure that a stock truly earns its place in your portfolio. Despite Zomato’s initial 30% gain catching your attention, it’s wise to wait for it to surpass significant milestones, such as its previous high around the 170 level, before considering an investment. Zomato’s stock took a dramatic turn, plummeting by about 75-76%, a stark reminder of the volatility and risks involved in stock investments.

The lesson here is to observe and wait for the stock to breach past critical resistance levels, like moving from 170 down to 100, and then considering entry points only after it has shown strength by breaking out of significant levels, such as 85 or the next resistance level. Jumping in prematurely, driven by the fear of missing out, can lead to dire consequences, as a 75% fall could be devastating.

Interestingly, from January 2023, Zomato’s stock made a remarkable turnaround, soaring by 250%, climbing from around 45 to 155, and achieving a 3.5x gain in just about 13 months. Even if you had waited for it to clear significant resistance levels before investing, you could have still reaped substantial gains, nearly doubling your investment if you entered around 80.

This narrative isn’t a specific stock recommendation but serves as a valuable insight for investors eyeing individual stocks for their portfolios. It underscores the importance of allowing a stock to demonstrate its potential and stability before making it part of your investment strategy. This approach not only mitigates risks but also aligns with a disciplined investment philosophy, steering clear of hasty decisions based on the fear of missing out.

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