Where is the market headed?
Tuesday 17 March brought a relief rally to the markets, but the question remains whether the pain is truly over. The coming days will provide more clarity on that front.
There is currently pain visible across different industries and on the ground, not just within the stock markets. A recent conversation with a garment exporter revealed that all garments to GCC countries have stalled. Furthermore, air freights from India to the UK and US have more than doubled. No fresh contracts are coming in at these current rates as everyone is adopting a wait-and-watch approach.
Polyester prices have gone through the roof, and cotton is also rising significantly. This sudden business uncertainty is hitting certain pockets of industry, which is likely to cause a prolonged adjustment or consolidation going forward.
Market Overview
The markets saw a small bounce today of 0.74%. The most important part of this event is that the Nifty has been able to close above a two-day high. This does not necessarily mean the markets have bottomed or will move vertically up from here; however, since this war started at the end of February, this is the first time the Nifty has reached a two-day high. Analysis suggests a two-day high is the first stepping stone toward building into something bigger. For those looking to take some risk, this serves as a first confirmation. While success is not guaranteed, prior to this point, it was not worth trying to catch the falling knife. Despite this, the medium and long term remain very negative for now.
Nifty Next 50
Looking at the broader indices, Nifty Junior was up 0.87%, mid-caps rose 1%, and small-caps gained 0.57%. While small-caps remain tentative, they are at least not falling.
Nifty Mid and Small Cap
Bank Nifty
Bank Nifty gained 0.85%, also closing at a two-day high, suggesting the short-term move is beginning to go positive.
GOLD
In commodities, gold was absolutely flat at 1,578 at 0.39%, and silver was flat at 0.15%.
SILVER
Advance Decline Ratio
The advanced decline ratio was heartwarming, with 323 advances to 176 declines. Typically, in weak markets, advances decline in the second half as more sellers enter, but today the reverse happened, setting up a positive outlook for tomorrow.
Heat Maps
The Nifty heat map appeared reasonably green. Stocks like Maruti, Mahindra, Bharti, JSW, LT, and IT stocks are performing better. The Nifty Next 50 also looked good, with DLF, TVS Motors, Motherson, and Tata Power doing well, alongside Zinc and Vedanta.
Movers Of The Day
In the mover of the day segment, MOIL rose 20% as sales reached their highest level in five years. Manganese ore and other commodities are likely to continue performing well. Moil has been extremely battered over the last two months. NOCIL also went up 6.48% to 145 rupees following new investment.
Sectoral Overview
Sectoral trends were positive except for FMCG and IT. Defensive sectors, which usually perform better in falling markets, often get beaten down as soon as the market turns. FMCG was down 0.75%, Nifty IT was down 0.97%, and Pharma was flat.
Oil and gas remained flat, but there were superb gains in Nifty Metal at 2.82%. High beta stocks are back in action, with Capital Markets up 2.17%, Autos up 2.11%, Defense up 1.8%, and Real Estate up 1.8%. This mix of rising stocks gives more confidence that this rally may have legs. Individual performers like Lloyds Metal, SAIL, National Aluminium, Tata Steel, and APL Apollo saw gains between 3% and 7%.
Sector of the Day
Nifty Metal Index
U.S. Market
The US markets were also positive in the previous session, with indices up approximately 0.8% to 1%. Companies like Mondelez, Salesforce, Intuitive Surgical, and Meta platforms rose 2% to 4%. Some of these are part of the weekend investing US strategy. The Nasdaq 100 heat map looked strong with Meta, Amazon, Nvidia, Apple, Google, Microsoft, AVGO, ASML, MU, and AMD all doing well.
Tweet Of The Day
In the tweet of the day segment, data from the Kobissi Letter showed S&P 500 one-year returns following oil spikes in 1986, 1991, 1998, 2003, 2008, 2016, and during Covid. Every time oil has surged 20% or more in any two days, the average one-year forward return for the S&P 500 has been 24%, with the only exception being the GFC where it fell 11%.
