Weekend Investing Daily Byte - 23 May 2024

Market Outlook

Today will be remembered for the great move on the Nifty, which crossed the previous two attempts at 22,800 and almost reached 23,000. The last ten days have been phenomenal, exceeding all expectations of a poor outcome from the elections. The market is heading into the election results, less than two weeks away, with the expectation that the current government will come in with large numbers.

First, let’s talk about copper. While it may not directly impact the stock markets immediately, looking at the last 25 years of data, copper had a huge commodity run, moving from less than a dollar to 3.7. It has been simmering for the last 20 years, and now it seems to be entering a new trajectory. This looks extremely volatile and dangerous, as an exponential rise in copper prices can have a detrimental impact on many downstream industries. Copper is a key metal used in a lot of industries, and usually, copper prices run ahead of the broader commodity cycle. Along with copper, zinc and silver are also moving up, indicating that a big commodity cycle, similar to those seen in the past, may be upon us. This could lead to damage in some industries, but it also shows that the world is ready to absorb these increased price levels, indicating strong demand.

Despite copper’s dramatic rise in 2003-2006, Nifty also went up during the same period, indicating that a great wave of money flowing into emerging markets can offset the impact of rising commodity prices.

Nifty Heatmap

Looking at today’s market, the Nifty heat map is extremely green. The left quadrant is super green, and this happens when banking runs along with the Nifty. HDFC Bank rose by 2.2%, waking up many of its sleeping investors. State Bank of India was up 1.6%, and Axis Bank and ICICI Bank also performed well. IT stocks, energy stocks, and autos saw significant gains, with Maruti, Mahindra & Mahindra, Tata Motors, and Eicher Motors all doing well. FMCG was slightly soft, and infrastructure stocks also saw some gains. Sun Pharma, however, was down after its results.

The Nifty Next 50 heat map wasn’t as green. It was slightly up but did not see as much of a run as the Nifty stocks. It’s likely that FIIs bought in a big way today, as many of them are technical traders who wait for significant levels to be broken before jumping in. With today’s breakout, we can expect a very nice FII buying figure. Additionally, many shorts built into the system ahead of the election outcome may have been covered today, concentrating the action in the Nifty stocks.

Sectoral Overview

Autos led the market today with a 2.3% increase, followed by the Bank Nifty, which was up 2.1%, led by private banks and PSU banks. Nifty itself was up 1.6%, and infrastructure and IT stocks also saw gains. Many sectors that had not been performing well recently saw significant movements today, while those that had been running for the past couple of months did not do as well. It’s like a relay race, with different sectors taking turns to drive the Nifty up.