How are the Markets Looking ?
The market opened strongly, with a 120-point gain, reaching 19,850 points. However, the entire day was characterised by consolidation and a gradual decline. Nonetheless, achieving the 19,800-point mark is commendable, placing us just a couple of percent away from an all-time high. While external cues will determine whether we continue to climb or witness a decline, some sectors showed positive movements.
Nifty Heatmap
Banking, power stocks, life insurance stocks, and FMCG stocks performed well, with notable exceptions like Tata Motors and industrial bank LNT. In the IT space, Hcltech, Infosys and HDFC Bank stood out, the latter beating expectations and rising by 0.76%. However, there are concerns about HDFC Bank’s performance in terms of chart movements, suggesting potential downside and an overhang on the entire bank Nifty. Any good news is not being rewarded as should be seen in the charts. In contrast, Kotak Bank, ITC, Coal India, Power Grid, and NTPC experienced significant gains ranging from 1% to 2%. Overall, it was a reasonably average day for the market.
Sectoral Overview
Public sector enterprise stocks rallied by 1.1%, making them the second-highest gaining segment after real estate. For the month gone by, they are up 5%, and for 12 months they are up 33%. It is the second highest gaining segment in the market after real estate. Energy stocks also demonstrated a positive trend, with a 0.9% increase. Other sectors, such as PSU banks, commodities, and FMCG, performed well, albeit to a lesser extent. These sector movements reflect a mixed sentiment within the market, with positive performances in select areas.
Mid & Small Cap Performance
The mid-cap index, currently in a congestion range, appears to be on the verge of a breakout. The formation of an inverse head and shoulders pattern suggests a potential upside, which could lead to a breakout.
On the other hand, small caps closed at an all-time high, a remarkable achievement following a challenging first half of September. If the market breaks above this high, a continuation and further upward movement can be expected. Thus, while the Nifty bank index remains stagnant, small caps show promise and demonstrate positive market sentiment.
Bank Nifty Overview
Global Markets Overview – Tailwinds for Gold
Assessing important indicators can provide insights into market trends and potential investment opportunities. One such indicator is the US dollar gold chart, which reveals a consolidation phase since its peak in August 2020. Notably, gold has formed an inverse head and shoulders pattern, with the right shoulder currently under formation. IF gold reaches the 2080 to 2100 dollar range, it could trigger a significant upward movement towards 2500.
Historical data shows that gold tends to generate substantial returns after the Fed fund rates peak and begin to fall, indicating a potential opportunity for investors. With the Fed fund rates already at 4.5%, and the possibility of rate cuts due to a recessionary outlook despite rising inflation, gold may experience a substantial surge in value. Investors should consider gold as a form of insurance rather than solely focusing on potential returns.
Another indicator to monitor is the US government bonds tenure, which has reached 4.75%. Sustaining demand with such high-interest rates may be challenging, especially considering the previous decade’s near-zero rates. The impact of these rates can permeate the economy and influence global markets, making it a crucial aspect to track.
Furthermore, rising Brent oil prices, currently hovering around 90 dollars after a dip from 84, suggest the potential for further increases. Additionally, evidence indicates that shale oil production may decrease this quarter, providing support for oil prices and potentially pushing towards $100. Observing these indicators can help investors navigate the market and identify potential opportunities.
Be on a Lookout !
As the upcoming earnings season approaches, market participants will be keenly watching for any downgrades or negative surprises. While the Indian market seems relatively stable, the US market may need to brace itself for potential storms of downgrades later in the month. How this quarter plays out will largely depend on the results and guidance provided by companies during this crucial period. Therefore, investors should pay close attention to earnings reports as they may significantly impact market sentiment and direction.
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