Weekend Investing Daily Byte - 22 May 2024

Hindustan Zinc

Today, we’re observing some fascinating trends in commodities. Hindustan Zinc, for instance, has surged dramatically from Rs 280 to Rs 800 after years of trading between Rs 200 and Rs 300. Similarly, Vedanta and Hind Copper are also riding this commodity wave. This indicates the start of a robust commodity cycle, potentially linked to the concurrent rallies in gold, silver, copper, and aluminum—all at all-time highs. As commodities continue to rise, there could be significant pressure on equity sectors that rely on these raw materials. This evolving dynamic is crucial to monitor.

Market Outlook

The Nifty experienced a typical day with the uptrend intact, moving 150 points and edging towards its previous high of 22,800.

Nifty Heatmap

The Nifty heat map showed a mixed bag: Hindustan Lever was up 2.4%, and other FMCG and pharma stocks like Cipla, Dr. Reddy, Britannia, Tata Consumers, and ITC also saw gains. Energy stocks like Reliance and Coal India were up, while the banking sector was notably weak, with SBI, ICICI Bank, and Axis Bank declining, though HDFC Bank was an exception. Metals showed a slight decline after recent strong gains.

A broader look at the Nifty Next 50 shows even more green. Dmart, LIC, HAL, and BEML have been consistent gainers. Dabur, Marico, and Godrej CP also rose, indicating strong performance in FMCG.

Sectoral Overview

Today’s session saw some notable movements across various sectors. FMCG emerged as the top gainer of the day, with a 1.4% increase. The real estate sector has been on an incredible run, up 121% over the past twelve months. It’s remarkable to think that just a year ago, few would have predicted such a massive surge in real estate stocks. Energy stocks also saw an uptick, rising by 0.9%, while the IT sector, gradually recovering, posted a 0.7% gain. However, IT is still down 11.9% over the past three months.

Commodities and metals took a slight breather today, with metals down 0.6%, but they have shown robust performance over the last month. The banking sector has been quite dull, not just today, but also over the past week, month, and three months. In contrast, PSU banks within the banking sector have performed well, up 81.4% for the year.

Nifty Mid and Small Cap

Mid caps continued their upward trajectory for the ninth session, while small caps hit resistance at 15,900 but are poised for a breakout soon.

Nifty Bank Overview

The Nifty Bank remains weak, requiring more consolidation despite bouncing off strong support.

Nifty Next 50

The Nifty Next 50 closed at a new high after a brief dip. Financial services took support, indicating varied performance across market segments on different days.

Vedanta

Vedanta’s impressive rally from Rs 300 to nearly Rs 500 reflects the broader commodity surge. Rumors suggest China is stockpiling commodities in anticipation of potential trade disruptions if Trump returns to power

Nifty Financial Services Index

The Nifty Financial Services index is finding support, showing varied performance across market sectors.

Nifty FMCG Index

The FMCG sector broke out of a consolidation phase, indicating potential for further gains.

Nifty REALTY Index

The real estate index has seen a remarkable rise, nearly doubling in six months, although real estate stocks often lead or lag the actual property market.

Real estate stocks might be the first indicators of a market slowdown before it’s visible on the ground. It’s important to differentiate between investing directly in an asset and buying equity related to that asset. For instance, gold equities come with counterparty risks, such as management quality and operating margins, which physical gold does not have. Therefore, if your goal is to hedge with gold, holding physical gold or a gold ETF without counterparty risk is advisable.