Nifty registered a flat day today. If you see, yesterday Nifty finally broke its eight-day losing streak by registering positive gains. But today, it was almost on the verge of losing about 0.8 to 1%. However, there was a good rescue done by some of the IT stocks, especially after 12pm when we saw good traction coming in IT stocks. The earlier sell-off was primarily driven by weakness in the FMCG counter, consumption counter basically, and some of the auto stocks. We’ll see more of that as we progress through the episode.

So how long should you withstand this pain in the markets? In today’s episode, we try to convey this through a very interesting statistic.

Where is the market headed?

Market Overview

One thing is very clear: 22,900 seems to be a very busy zone for Nifty 50. Especially today, as we discussed, there was a steep fall. Markets fell about 0.7 to 0.8% at the start and recovered as the day progressed to close exactly around the close point of yesterday’s session, or rather the high of yesterday’s session. So, Nifty 50 was absolutely flat today with a 0.06% loss, but I wouldn’t count too much into that. One good thing is that maybe there are some very, very slight hints that the bulls are not willing to give up on this level at 22,800. That is the takeaway personally for me.

Nifty Next 50

Nifty Next 50 index was totally flat with a 0% change. Yet again, we are seeing some support emerge for Nifty Next 50 at the 59,500 mark, which is a good sign.

Nifty Mid and Small Cap

Moving to the Mid Cap index, we saw a 0.18% loss, with a very similar chart when you look at it, compared to the Nifty Next 50 index. Currently, we are at 18,375, and this becomes the busy zone. But ideally, as we discussed yesterday, and I would like to reiterate this today, mid caps and small caps must break the trend of lower high, lower low. That’s when we can precisely say that there’s some hint of recovery. But from a very, very short-term perspective, we will wait for a two-day high break. So, today’s high break being essentially yesterday’s high is very critical for the small-cap index. In fact, small cap was the weakest today, losing about 1.38%, making it the weakest performing index. The benchmark index is at 16,330, where the 40-day moving average is currently at. It seems like a long way from here, but you never know when optimism could come through to the markets, and small caps may perform better in terms of recovery.

Nifty Bank Overview

Bank Nifty was down by 0.35%, but nothing too much to worry about. In fact, it’s been oscillating between the band of 47,700 and on the upside, we have seen 53,700. From a short-term standpoint, I think it’s very close to breaking above the 40-day moving average. All eyes are on that in the near future.

GOLD

Gold was up by 0.58%, showing good performance for two consecutive days. Gold is finally trying to create this pole and flag formation. This is the pole, this is the flag, slowly trying to get above this mark. Once this resistance is taken out, we’ll have to wait and watch if there can be a good rally on the upside.

Advanced Declined Ratio Trends

Yesterday we saw it was more evenly matched, but today the bears seem to have the upper hand. In Nifty 500, there were 344 declines compared to 155 advances. It’s more evenly spread out for Nifty, thanks to some IT stocks. We’ll see that in the heat map as well. But small-cap 50, mid-cap 50 are all completely beaten down, inclined towards the bears.

Nifty Heatmap

As you can very clearly see, FMCG consumer stocks like Hindustan Unilever, ITC, and Britannia are all losing about 1.4%, while ITC is losing 0.8%. In fact, some auto stocks like Mahindra and Mahindra, Bajaj Auto, Tata Motors, and Hero MotoCorp are all losing too. But just take a look at this counter – this is the only strong counter in this entire pack of Nifty 50: Infosys. Wipro and Tech Mahindra are also registering very solid gains at about 2.2% and 2.4%. Infosys is also doing well, and HCL Tech is doing well at 0.9%. In fact, if you see, until about 12 noon, it wasn’t doing so well, but it picked up really well and clocked almost 1% by the end of the day.

With regard to the Nifty Next 50 heat map, you can see some pockets like DMart, LTIM, Naukri, Zomato, and Motherson Sumi are doing really well, registering 3%+ and 2%+ gains. On the other hand, stocks like JSW Energy, Gale, and ATGL have been weak. The finance pocket seems very weak, with pharma stocks like Torrent Pharma, Divis Labs, and Zydus Life losing quite a bit.

Sectoral Overview

The same narrative from yesterday continues, with defense being hammered completely down by 3%. On a weekly basis, it is down by 10%, and on a monthly basis, it’s down 20%. So, be careful. Absolutely be careful, folks – that is the humble request. Please don’t assume that one sector will do well forever. It has done really well, but half of the pack is registering positive gains, while the rest are registering negative gains today. On a weekly basis, except for metals and financial services, there is no sector in green. On a monthly basis, we have just a few sectors, and again, some of the banking spaces are exceptions. Except for the banks, no other sector is in green on a monthly basis. The worst performers are defense, capital markets, media, etc.

On a 3-month basis, all are beaten down, while on a 6-month basis, there are some hints of green. Nevertheless, it’s a mixed pack when we look at yearly performance. Banking stocks are looking very good at this point, as a takeaway from this overall chart.

Sectors of the Day

Nifty IT Index

The sector of the day is IT, which saw phenomenal performance, picking up after 12pm today. Initially, it was flattish or mildly negative but picked up really well, following a clear trend line.

Some good performers include Persistent Systems, LTI, L&T Tech, Mahindra, Wipro, HCL Tech, and Infosys, all contributing to the good performance in IT stocks.

Story of the Day : How bad is the correction in small caps?

What is difficult is not the bull run, but having the conviction and appetite to go through a bear run or a phase of correction. That’s exactly what we saw yesterday when we tried to analyze the worst performances across different timeframes and look at the performance after such occurrences in the past.

In today’s episode, we are analyzing this from a time frame perspective: how long is this pain going to sustain, and what should be your mindset to deal with this kind of market regime?

What is difficult is not the bull run, but having the conviction and appetite to go through a bear run or a phase of correction. That’s exactly what we saw yesterday when we tried to analyze the worst performances across different timeframes and look at the performance after such occurrences in the past.

In today’s episode, we are analyzing this from a time frame perspective: how long is this pain going to sustain, and what should be your mindset to deal with this kind of market regime?

Looking at past corrections, the time it takes for small-cap stocks to recover varies significantly. Historically, some bear markets have lasted 6 months, while others have stretched to more than a year. The key takeaway is: patience is vital. The markets don’t operate on a fixed timeline, and while it might feel painful in the short term, the best strategy is to focus on long-term growth and ignore the noise of daily fluctuations.

When you experience a market downturn, remember this: It’s always darkest before the dawn. If you can keep your composure and resist making impulsive decisions, you’ll likely be better positioned to benefit when the market rebounds.

The Power of Compounding
One powerful strategy that can help you weather these storms is understanding the power of compounding. As markets correct, it can be tempting to pull out and avoid further losses. But if you believe in the fundamental growth of companies and industries in the long term, staying invested allows you to compound your returns over time. This means that while you may face short-term losses, the money you leave invested will grow exponentially once the market recovers.

In essence, it’s the same principle applied to a savings account, but amplified in the context of investments. So, rather than trying to time the market or constantly jump between stocks, focus on the long-term horizon.

Mental Resilience During Market Downturns
Lastly, mental resilience is one of the most important attributes for an investor. Market fluctuations can often shake your confidence, but sticking to your investment strategy and remaining calm through the chaos is crucial. Avoid making emotional decisions—whether it’s panic selling or buying impulsively based on short-term news.

Remember, the best investors are often those who can maintain a level head when the market is volatile. They trust their research, stick to their plan, and have the patience to wait for recovery.

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