WeekendInvesting Daily Byte : 13 Sep 2023

September 13, 2023 4 min read

The past trading session witnessed a significant downturn in the small and mid-cap space, with deep crashes and sell-offs. However, it is crucial to note that despite this turbulence, the large-caps performed remarkably well and held their ground firmly. The Nifty, for instance, started the day at the 20,000 mark and, after a volatile period of navigation, closed at an all-time high of 20,063. This suggests a potential shift in focus from small and mid-caps towards large caps.

The stability in the large-cap space can be attributed to the performance of public sector enterprises such as ONGC, Coal India, and BPCL. Additionally, power sector companies like NTPC and Power Grid, as well as banks, especially PSU banks like SBI and Axis Bank, have been doing well. Private banking, represented by Kotak Bank, also observed a 1% gain. On the other hand, there was some sell-off in the IT space and a few specific stocks like Larsen & Toubro and Mahindra and Mahindra, due to rumors and speculations regarding GST implications and offloading of stock picks.

One sector that has shown exceptional strength and promises further potential is the public sector unit (PSU) banks. These banks experienced a shake-off in the previous session, followed by a surmounting of that candle and subsequent gains in the current session. This indicates a lack of weakness in the PSU banking sector and reaffirms it as a go-to sector for investment. In fact, PSU banks observed a remarkable 4.2% gain in a single session, strongly indicating their desire for rerating and the potential for further growth.

While PSU banks stand out as a strong sector, other sectors also showed some gains, ranging from 0.3% to 0.9%. However, it is important to note that these gains might be a reaction to the sharp fall witnessed in the previous session. The IT and auto sectors, on the other hand, experienced a slight dip. We must be cautious in interpreting these trends and wait for a few days to assess whether stocks have truly recovered from the previous session’s damage or if further consolidation or decline is on the horizon.

Understanding market corrections and trajectories is crucial for investors. The mid-cap 100 index witnessed a significant cut below the previous day’s low, followed by a strong recovery, ultimately closing near yesterday’s levels. While this recovery suggests the potential for further gains, it is important to monitor whether the trajectory holds or if a retest of the previous bottom is likely. Small caps have shown a more positive performance compared to mid-caps, recovering around 25% of the previous day’s losses. Monitoring the trajectory and consolidation range will be crucial to identify potential outcomes.

Preparation is key in the stock market. With the possibility of different outcomes, it is prudent to have plans for each stock, sector, and investment strategy in case things do not go as anticipated. Having a ready plan for any scenario, including worst-case scenarios, allows investors to make informed decisions and navigate through market uncertainties. It is also important to acknowledge that the U.S. market, often considered the mother market, influences global triggers and impacts emerging markets, including India.

The banking sector, both private and PSU, witnessed a bullish trend and demonstrated strength in the current session. Nifty Bank, in particular, displayed a fully bullish engulfing candle, indicating a positive momentum. PSU banks, exemplified by Punjab National Bank, quickly recovered from the previous session’s downturn, showcasing the dominance of bulls in this segment. Hence, it is advisable to look for buying opportunities in public sector banks on dips, as they remain in strong control and exhibit further potential for growth.

The recent trends in the stock market indicate a potential shift of focus from small and mid-caps to large caps. PSU banks have shown resilience and strength, making them worthy of consideration for investment opportunities. Other sectors have also experienced gains, albeit cautiously, following the turbulent period. It is crucial to closely monitor market corrections and trajectories, while always being prepared for various outcomes. By being well-prepared and well-informed, investors can make strategic decisions that align with their investment goals.

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    WeekendInvesting Daily Byte : 13 Sep 2023