Today was a mixed bag, with large caps running hard as Nifty edged closer to its all-time highs. Some sectors took a backseat, but overall, the markets showed strength. We’ll dive into the market performance first and later discuss an illustrious investor whose methods can save us from big losses.
Market Overview
You can see here that Nifty has just about closed the gap that was forming earlier. Now, with the benefit of hindsight, we can say that this was a good base, and Nifty has taken off from here. So now, this becomes the line of control going forward. Below that base is where weakness will really start. Otherwise, we are heading upwards. Resistance will come near 25,000, but this was a very nice gap to fill, which has now been filled.
What needs to be seen in the next few days is that we don’t break down below, let’s say, a two-day low here. Even if we go sideways for a day or two, we should cover this in the next three, four, or five sessions. That would be good to reach 25,000. Also, by the end of the week, the Fed meeting is coming up next month, and that is going to become the center of attraction in terms of the narrative very shortly. There is talk about a 50 basis point cut as well. If that goes through, we are likely to see some heightened flows towards the markets. However, it’s important to remember that when an interest rate cut cycle starts, most markets top out for some time. This has been the case in the past, so it’s a difficult forecast to make.
Nifty Next 50
Today, Nifty was up 0.5%, with Nifty Junior doing even better at 0.82%, moving well beyond the gap filled yesterday.
Nifty Mid and Small Cap
Mid caps and small caps also saw positive movements, with mid caps up 0.83% and small caps up 0.54%.
Nifty Bank Overview
Bank Nifty has moved up, though not yet out of the range. It really needs to pick up and go a couple of thousand points to regain momentum, but nevertheless, it closed 0.86% higher. No one is complaining about the banks today.
In terms of momentum average trends, on a very short-term basis, things are moving up between last week and now, whether it’s the 20-day, 50-day, 100-day, or 200-day moving averages. All averages are moving up, which is always a good sign going forward. The advance-decline ratio for the last three sessions has been in favor of the bulls, correlating well with the index movement itself. For those doing shorter-term trading or swing investing, this is a good source of the daily market makeup. By 9:30 or 10:00 in the morning, you can look at the advance-decline ratio to get a sense of where the market is heading. Of course, there will be U-turns, but most of the time, with a high probability, you can gauge the strength of the move up or down in the first hour.
Nifty Heatmap
Looking at Nifty, it was reasonably green today. We saw more green in the banking and finance space and some green in the IT space. Reliance, Coal India, and ONGC lost some ground, as did ITC, but overall, it was a mixed bag veering towards a slightly green day. Nifty Next 50 was much more green. It wasn’t so green at the beginning of the day, but it picked up later. You can see a lot of banking and finance names in the green, along with public sector enterprise stocks and finance stocks within that sector moving up. PSU banks, such as Union Bank, Bank of Baroda, and PNB, were among those gaining in anticipation of lower interest rates, which help banks as the value of the bonds on their books increases.
You also saw consumption stories like D-Mart and Trent doing well. Indigo, Motherson, Gail, and Varun Beverages held steady after yesterday’s run. HAL, Ambuja Cement, LIC, and IRFC were slightly down. Overall, it was a nice green day for the Nifty Junior as well.
Sectoral Overview
Sectoral trends show that PSU banks have come back with a 1.7% gain for the day and are leading the market for the week, with all sectors in the green. For the month, all sectors are in the green except for real estate. Bank Nifty, including PSU banks and private banks, metals are flat, while pharma and IT have done well in the last month, followed by energy and consumption stories. Banks, along with IT and pharma, were the flavor today, leading the market.
Sectors of the Day
Nifty PSU Bank Index
PSU banks gained 1.68% today, but they have not yet closed the gap that was created about ten sessions ago. It’s important to note that PSU banks have been in a range since February, about six months now, and did not go beyond the election day high, which most other sectors did. So we are stuck in a range, but this range is wide, almost 1,200 points wide, representing a good 20% move from one end to the other.
Stocks of the Day
Angel One Ltd
Today’s stock spotlight is on Angel One, which has really U-turned after a long time. Since January, it had been in a terrible fall, from nearly 4,000 in January to as low as 2,000—a nearly 50% drawdown. However, it has rapidly turned around in the last two to three sessions, going from near 2,000 to about 2,700. Angel One is something to keep on your watchlist. It had a range earlier, but from 2023 onwards, it went from 1,000 to 4,000. It has since corrected, but now it seems ready for the next onslaught.
Story of the Day
Today’s story is about a personal favorite investor of mine, Stanley Druckenmiller, who has been an amazing fund manager, leading many funds. We’ll talk about his story and the lessons from his journey, which are very valuable. Druckenmiller is around 70 years old and founded Duquesne Capital in 1981. He later became the lead portfolio manager for Quantum, George Soros’s fund, and his claim to fame is that he broke the Bank of England by shorting the British pound in 1992, leading to significant profits for himself and Soros. He ended his role at Quantum in 2000 and has since been managing his own family wealth.
Druckenmiller’s approach to investing is a unique blend of aiming for asymmetrical bets, where potential gains are much larger than potential losses. He believes in making substantial investments when confident in his analysis and diversifying across asset classes. His method of asymmetrical betting is powerful, allowing for big gains while limiting losses. This approach is similar to momentum investing, where we allow stocks to run hard and cut losses early. Druckenmiller’s approach involves betting big on strong convictions, diversifying across various asset classes, and maintaining mental flexibility.
Mental flexibility is crucial in Druckenmiller’s strategy. He advises against marrying your initial position and stresses the importance of being able to change your opinion and act fast when the situation changes. This adaptability is vital in navigating changing market conditions.
Druckenmiller is not afraid of leveraging when he feels confident about a bet. He has used this strategy effectively in various asset classes, including real estate. He also employs a top-down approach, analyzing the macro environment before honing in on specific trades. He focuses on imbalances in the debt cycle and how central governments’ indebtedness will impact stocks and gold.
