Where is the market headed?
For the third day in a row, the Nifty has come back up from the red. While it is not 100% certain, the behavior of the market suggests that the market is not willing to go down again unless really catastrophic news comes from overseas. It does not appear that we are in that mode right now. Perhaps there are also some chances that we are very hopeful of a rate cut by the RBI on 8th of April. If that happens, some animal spirits will be cut loose. That will be seen tomorrow, but let’s see what happened in the markets today.
Another background story that is developing is about the petrodollar. In the 70s, the US offered protection to the Middle East and stated that oil would not be sold in any currency except the US dollar. That is how the petrodollar came about, where Middle East countries sold all oil in dollars. The resulting dollars were then reinvested in the US markets, whether it was bonds, equity investments, or direct investments into projects. Their money was getting rotated. The US was creating money and basically allowing a significant amount of transactions in the world to remain only in dollars so that they would come back and invest in the US dollar system. That petrodollar system is now breaking, with more and more countries now opting for non-US dollar payments.
If non-US dollar payments are being taken—for instance, if Saudi Arabia starts to sell oil only in yuan—then they will invest yuan in China, and there will be no further investments in US Treasuries. There is a big issue about how this US dollar system is essentially breaking up, and that will have a lot of other ramifications also. This is a brief synopsis of the background stories going on besides the war. This is going to blow up very big if it comes to that.
Market Overview
Looking at the market charts, for the third time since the Iran war started, Nifty has closed at a two-day high position, which is the first flag for a potential rally. A trend line break seems to have happened here. There has been a very nice three-day run. There was a three-day run previously as well, so this is not to say it is unbeatable, but since the second week of March, the market is still at the same place. Almost more than three weeks have gone by and the markets net-net have not given up any position on the Nifty.
That is very positive given that the last three weeks have seen substantial deterioration in terms of geopolitics. From that point of view, it does seem like Nifty is gathering some momentum and finding its feet. Perhaps we have seen the bottom of this rally, though nobody will ever know for sure.
Nifty Next 50
The 23,000 level has been regained again, which is good news. Short-term moves are looking positive. A similar trajectory is seen on Nifty Jr., which is up 0.46%, and the short-term momentum trend is positive.
Nifty Mid and Small Cap
Mid-caps are also up three days in a row, although today’s move was barely flat at 0.1%. Small caps are marginally up at 0.13%. The short-term move is positive here, and levels are the same as they were almost a month back. Net-net over the last one month, small caps have not dropped.
Bank Nifty
Bank Nifty is up 0.2%, which is not very strong but is gradually building up with a fourth green candle.
GOLD
Gold is flattish at 0.42% and is just at a breathing time right now.
Crude Oil
Oil is something that everybody is watching. Every time Brent crude goes beyond 111 or 112, there is some sort of a sell-off. Today it almost reached 111.8 and has come off to 108.8. Selling comes around at this price, and only a major escalation would cause it to cross 112 toward 150.
Advance Decline Ratio
Advanced decline trends were absolutely flat after the first hour, ending almost even at 262 to 237.
Heat Maps
The Nifty heat map is largely green with no major reds. Some pharma stocks lost small amounts, but IT stocks are going up very nicely. Bharti Airtel is also doing really well in the Nifty.
In the Next Nifty, there were some losses in stocks that were running hard yesterday. DMart has been running three days in a row. Bank of Baroda and Union Bank were also running yesterday. Vedanta, Jindal Steel, and Hindustan Zinc were among the metal stocks moving up today. Overall, it was a very nice mixed bag for the Nifty Next 50.
Movers Of The Day
In the movers of the day, Titagarh Rail Systems zoomed 9% as they received a 610 crore project. Titagarh is moving up nearly 700 rupees on that news. Jubilant FoodWorks dropped more than 10% on a big miss on quarter four updates.
Sectoral Overview
Sectoral trends show a very strong move in Nifty IT. Over the last one month, Nifty IT is the only sector that has gained 4.2%. The tables have turned over the last year or perhaps three months when Nifty IT was one of the biggest losers at minus 18.8%. In the last month, Nifty IT has come back, and for the year it is now about minus 4%. This is not bad given that Real Estate is down 10%, FMCG is down 12%, and Media and Tourism are also down. Some sectors are still looking very robust over the last year, like Metals up 50%, Capital Markets up 41%, and PSU banks up 35%.
Today, Real Estate, Metals, and Defense stocks were running hard. Tourism, PSU banks, and Capital Markets lost some ground. High beta stocks were in the lead today, which provides optimism that the market is trying to turn.
Sector of the Day
Nifty IT Index
Emphasis, Wipro, HCL, LTIM, and TCS were all doing well. It appears to be a rounding bottom pattern on the Nifty IT index, suggesting the fall may be coming to an end.
Nifty Tourism Index
Tourism and hotel stocks were down today, including ITC Hotels, East India Hotels, TBO, Interglobe, and Jubilant FoodWorks.
U.S. Market
In the previous session of the US markets, Booking Holdings and Starbucks were up 5%, while GE Aerospace and Lockheed Martin defense stocks were up along with Texas Instruments at 2.3%. Markets overall were up 0.4% to 0.6%. Some of these stocks could be part of the Weekend Investing US stock strategy, though these are not recommendations. The NASDAQ 100 heat map looks quite good with Apple, Google, Amazon, Walmart, MU, and Cisco gaining, while Tesla and ASML lost ground.
Tweet Of The Day
The tweet of the day segment features the oil chart. There was a development a couple of hours before the market closed. Between 1:00 and 2:00 PM Indian Standard Time, there was a very sharp drop in oil from nearly 112 to 108. Some internal developments look to be in place for this kind of fall, and the narrative may be revealed later in the day. Tomorrow is the RBI meet for potential interest rate changes. Let’s hope for a cut tomorrow.
