The markets did a yo-yo today, with everyone expecting the head and shoulders pattern to dictate the market. While the market did crack below the neckline, it recovered very quickly. The earlier sellers of the morning were caught on the wrong foot as the market managed to bounce back. In today’s Daily Bite, we will discuss whether this is a strong comeback by the bulls or just a flash in the pan, delving deeper into this in the second half of the video.
Where is the market headed?
Market Overview
In terms of where the markets are headed, we are currently going nowhere. We find ourselves roughly where we were on July 15, meaning that almost three and a half months have passed with the market hovering in the range of 24,000 to 26,000. This range isn’t bad; we’ve come from nearly 20,000 near the elections to the current levels. As mentioned, everyone was watching the head and shoulders pattern. Although it cracked in the morning, the recovery has been substantial. If we manage to go above these tops, the pattern could still be negated. As of now, we remain below the neckline, but the downside has certainly been thwarted.
Nifty Next 50
Today’s action saw a slight increase in Nifty by 0.4%, while Nifty Next 50 also cracked hard but recovered slightly, closing at a 0.38% increase.
Nifty Mid and Small Cap
Mid-caps showed a long-legged candle with a recovery, although we haven’t gained much compared to yesterday’s close, finishing at 0.17%. Small caps displayed a similar long-legged tail, remaining essentially unchanged at -0.04%. Overall, the formation of the candles seems reasonably good; we’re neither bullish nor bearish.
Nifty Bank Overview
Bank Nifty, however, is looking strong, not creating the right shoulder as expected and showing a gain of 1.57%.
The European Central Bank is also cutting rates, contributing to a global clamor for rate cuts.
Advanced Declined Ratio Trends
In momentum trends, we observed 258 advances against 236 declines—nothing exceptional. FIIs continue to sell, with ₹7,400 crores sold on 17 October, while DIIs bought ₹5,000 crores. This marks the biggest month of selling in the last month by FIIs, yet the market remains just a few percentage points from its recent top, highlighting the strength of domestic liquidity.
Nifty Heatmap
Today’s heat map was a mixed bag, with banks balancing out the weakness from Infosys, which was down 4.5%. Asian Paints dropped 2%, Britannia fell 1.6%, and ITC was down 0.45%. On the other hand, Axis Bank gained 5.7%, along with HDFC Bank, State Bank of India, and ICICI Bank. Interestingly, Fipro, despite disappointing results, was up 3.76%. Other gainers included Tata Motors, which rose 2%, and Aisha Motors, up 3%. DLF also showed good gains, alongside public sector banks like Canara Bank, Bank of Baroda, and PNB.
Sectoral Overview
In sectoral trends, private banks led the market today with a rise of 1.9%, which is encouraging news after a long stagnation. Over the last twelve months, the private banking sector has shown the lowest gains among all sectors, making this upward movement significant. Metals performed well as well, increasing by 1.6%, while PSU banks showed a gain of 1.3%. However, FMCG and consumption stocks continue to bleed, with disappointing news impacting both the two-wheeler segment and FMCG stocks.
Sectors of the Day
Nifty Private Bank Index
As noted, private banks have consolidated since June, with election-day highs providing crucial support.
Stock of the Day
Motilal Oswal Fin Ltd
Stocks like Axis, ICICI, and RBL have shown upward movement, with Motilal Oswal serving as a barometer for the market’s health. The stock has surged from around ₹500 a few months back to ₹1,000, reflecting overall market performance. Notably, the stock had not shown much growth for nearly 14 years, demonstrating the market’s volatility.
Story of the Day
The bulls made a strong comeback today, opening at 1.25%. The first 15 minutes saw significant selling due to the neckline being broken, but once restored, confidence returned, leading to a short-covering rally. While we cannot predict how long this situation will last, today’s breakdown of the pattern has been negated. Looking at the long-term trajectory, the monthly chart of Nifty appears solid. After four months of gains, one down month is not concerning.
The Nifty’s half-yearly chart over the last 34 years indicates that only ten times has a half-year period been red out of 44, suggesting a strong inclination toward long-term gains in the Indian market. Moreover, we have not touched the 200 DMA in a long while. The last time Nifty was below the 200 DMA was March 2023. Typically, when the Nifty crosses below the 200 DMA, it presents a good opportunity for long-term investors to add capital.
In conclusion, even during corrections, many investors may exit and never return, but those following the Weekend Investing strategies should feel confident about staying the course. It’s essential not to get bogged down by daily market noise. If you are employing a strategy that involves weekly or monthly rebalancing, there’s no need to obsess over daily fluctuations. Just follow your strategy; it will manage itself over time
