Weekend Investing Daily Byte - 15 May 2024

Breaking News

In today’s breaking news, SEBI has instructed exchanges to halt trading of Brightcom Group. The stock, which surged from a few rupees to nearly Rs120, has now plummeted back to Rs10, triggering lower circuits daily. This highlights the typical market phenomenon where stocks experience rapid ascents, followed by sharp declines, known as the Namaste pattern.

It’s crucial to recognize these trends and exit accordingly. Even during this fall, there were ample opportunities to exit profitably. Those who had an exit plan in place could have made significant gains, even from a base of Rs10.

Examining the shareholding patterns, while not entirely clear, shows an increase in the number of shareholders since March 2021. However, the overall percentage of ownership has decreased, indicating an influx of small shareholders. Over 5.75 lakh shareholders are now trapped in this stock.

It’s essential to have a proper strategy to safeguard your capital. With the market, always stay vigilant

Market Outlook

Nifty traded above the three-day high this morning, briefly, before retracting some gains. However, it closed very close to yesterday’s level. This consolidation over three days is not necessarily a negative development. Currently at 22,200, a period of consolidation before an upward move would be favorable.

However, if we start to decline and fall below 22,080, the two-day low, it would signal a potential continuation of the downward trend. A close below this trend line would further confirm this direction. In that scenario, we could expect a drop towards 21,000. That’s the likely outcome, in my estimation.

Nifty Heatmap

Today’s Nifty heat map shows mixed performance, with HDFC Bank down 1.5%, Tata Motors and Asian Paints both down 1.8%. These stocks, often referred to as “buy at any price” (BAAP), have struggled over the past year and a half, leaving investors questioning their performance.

It’s common for stocks to rally ahead of earnings, only to experience a period of stagnation as earnings catch up over several years. This highlights the risk of buying at any price. ITC and TCS both saw marginal declines, while Bharti Airtel performed well.

The biggest gains came from public sector enterprises such as Coal India, BPCL, NTPC, and Power Grid. LIC surged by 6%, Adani stocks rose, and Siemens soared by 6.8%. However, Colgate and Dabur experienced significant declines post-results. DLF, IRF, CPNB, and Canara Bank, which underwent a split, were also down.

TVs Motors and Berger Paints are both experiencing declines. Surprisingly, many paint companies are hitting 52-week lows in this market. Can you believe that?

This underscores the importance of having a proper strategy in place. Weakness in your portfolio should be addressed until strength returns.Proper portfolio management is crucial in removing weakness until strength returns.

Sectoral Overview

Today, public sector enterprise stocks surged by 1.8%, while public sector banks rose by 1.4%. Energy stocks saw gains of 1.2%, and real estate climbed by 1%. These sectors showed robust performance.

Metals were slightly soft today, despite being a historically strong sector. Conversely, FMCG experienced significant losses, marking a decline of 2.6% for the week, indicating a substantial setback for the sector.

Nifty Mid and Small Cap

Mid-caps are soaring, nearing all-time highs and showing remarkable strength compared to the Nifty. It seems like there’s no weakness in this segment at the moment. Small caps are also making impressive gains, rising from 14,800 to 15,500 in just three sessions. This suggests they may soon challenge their previous highs.

Nifty Bank Overview

The Nifty Bank showed lackluster performance, particularly with HDFC Bank losing ground. More consolidation seems necessary. Banking hasn’t been in a strong leadership position lately, and until banks show significant leadership, meaningful market momentum may be lacking.

Nifty Next 50

Nifty Next 50, also very near all time high is a good recovery from the bottom. The scare of a waterfall event for now has been moved forward.

Gold Spot

Gold has begun to rise again. Looking at the dollar gold chart, we saw a fantastic run from the second week of February until the second week of April, where prices surged from $1980 to about $2400 before stabilizing for a month. Now, it appears that the stage is set for the next all-time high. Gold is looking very promising.

Nifty PSE Index

Nifty’s public sector enterprise index is showing strong performance. The recent fall appears to have been a retest of a breakout, and now the index is trending upwards again. This is a positive sign and indicates strong momentum.

Nifty FMCG Index

The FMCG index’s breakout from the congestion zone seems to be failing, and we are now falling back into that zone. This is not a positive sign. Despite reports from companies like Hindustan Unilever indicating an uptick in rural demand, the charts don’t seem to be reflecting this trend.