How are the Markets Looking ?

The breakdown that occurred four days ago was a clear signal of the market’s bearish sentiment in the shorter term at least. The subsequent rise observed over the last three sessions was merely a retest of the previous fall. This retest confirms that the market is not ready for further advances at the moment. Instead, it requires a consolidation phase to stabilize.

We can observe several gaps that may potentially be filled during this consolidation period. It is interesting to note that the previous thesis of the market reaching 25,000 by the elections seems to have been dented by the recent events. While it is still possible for this target to be achieved, the rally from October to March shows signs of needing consolidation. Since December 19, the market has experienced fluctuations but has been unable to surpass the 21,600 mark on the weekly chart.

Nifty Heatmap

Nifty heat map painted a gloomy picture on this day, with all sectors in the red. Key stocks like Reliance and ITC were down 2%. Many other stocks experienced a significant decline of 4-10%, with Z Entertainment leading the pack at a staggering 32% drop. On the other hand, a few stocks, namely ICICI, Bharti Airtel, Sun Pharma, etc. posted positive price action.

Sectoral Overview

Real estate took the biggest hit, declining by 5.3% in a single day. Public sector enterprises and banks also suffered losses of over 4% each. Additionally, metals, commodities, energy, Bank Nifty, and infrastructure all experienced declines of around 2-3%. Overall, the Nifty itself was down by 1.5%, indicating a challenging week overall.

Looking at the sectoral overview, we can see that Public sector enterprise stocks have made a strong comeback, with a 77% increase over the past twelve months, though losing out 4.3% today. The leader of the pack remains Real Estate having amassed a massive 92% in the last 12 month period. Infrastructure stocks, Commodities, Consumption stocks, Metals, FMCG have all done very well in the last 12 month period.

Despite this recent setback, it is worth noting that many sectors are still in the green when considering monthly returns. However, the significant drop witnessed on this day has slightly tarnished the overall performance. It is essential to keep an eye on the small-cap stocks, as they have experienced a sharp decline, potentially signalling a deeper correction in the coming days.

Mid-Small & Small Cap Performance

It is essential to keep an eye on the small-cap stocks, as they have experienced a sharp decline, potentially signaling a potential deeper correction in the coming days.

Analyzing the market sentiment, it is crucial to address the support level at 17,000 for mid-cap stocks. The market has tested this level twice before without a decisive breakout. A meaningful break below this support level could provide an opportunity for short-term traders or investors looking for advantageous entry points. However, it is pertinent to remember that even during healthy bull markets, it is normal to experience retracements of 20-40%.

Nifty Bank Overview

The Nifty Bank index has been a significant contributor to the market’s downward spiral. Since the fall of HDFC Bank, the Nifty Bank index has been on a consistent decline. The index is currently approaching the gap left by HDFC Bank’s fall, necessitating a period of consolidation before any meaningful recovery can take place. With HDFC Bank representing 13% of Nifty, its poor performance has a significant impact on the broader market.

Highlights – ZEEL’s Crash

One standout stock on this day was Z Entertainment, which experienced a colossal 32% drop in market capitalization due to the failure of a proposed merger. This particular case highlights an important lesson for investors – the importance of recognizing signs of weakness and taking appropriate action. Z Entertainment’s stock price has been on a downward trajectory since 2018, erasing a significant portion of its market value. It is crucial to exit positions when the market sends clear signals of decline in order to mitigate losses.

Highlights – HDFC continues to remain weak !

Another critical factor contributing to the current market sentiment is the disappointing performance of HDFC Bank. Despite being a heavyweight in the market, the bank has not delivered substantial price action returns in the past three years. This has left investors disappointed, casting a shadow over Nifty’s growth.

PSE stocks have run up quite a bit and may be poised for some corrections going ahead.

Real estate as mentioned earlier has completely given up about 5% for the day. This correction also seems very much par for the course.

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