The writer shares an overview of the stock market at large with a focus on sector-wise movements in April
The Indian Stock Market has come a long way from being a taboo subject, to a topic of discussion on the dinner able.
As Warren Buffett puts it, “The stock market is a device for transferring money from the impatient to the patient.” Time and again, the markets have proven it, over all these years markets have moved in all its ways, it has shown great rallies and even greater falls; it has tested patience of investors in its year long consolidations, made and unmade fortunes in it bull and bear trends – still it has remained unobserved by the masses. Then came a time which changed the way Indians saw it forever; the straight rally of 11000 points following the covid crash where the Markets tasted the level of 7550.
The market had moved more in this year and a half than it did over last 10 years. This rally could not remain ignored; this was a time of easy money in the Market. Profits happened left, right and centre, hence, the number of demat account holders doubled in this period, 3.6 Crore in March 2019 stood at 7.7 crores as of October 2021. That historic rally took Nifty to the heights of 18600, and since then it has been range bound for the last 6 months, between the high of October of 18650 to low of March at 15650.
Shrugging the Holiday Mood:
Well, as it is said for any relationship; the real deal starts once the honeymoon period is over, and for all the new romantics in the market, the easy phase is over. With the world getting back to its old self, the Markets did so too and when it did, again many lost the money made during the rally and more, as from here only those who are serious and patient shall survive as Buffett put it well. In a rangebound market, making money is the most difficult and for those who wish to learn, the process is tedious, as in a range bound market the only way to make money is through derivative market or going stock specific, and both demand far greater attention than following the trend of the indices.
The Bate and Feeds:
Over the last few months Indian Markets have seen a lot of volatility owing to various reasons. Starting with the Foreign Institutional Investors booking their profits, the Omicron variant scare, US Bond Yields, the high inflation rates, credit policy of RBI, the Union Budget, interest rates, the upcoming monsoon reports, Brent crude prices, the quarterly result season the major one for now being, the Russia-Ukraine War.
What the charts say:
24th February, the day the war began, the Indian markets opened with one of the biggest gap downs, at over 500 points with a close of more than 800 points that single day. With the opening way below ‘200 day moving average’ (200 MA) mark, the fall intensified till 15650 from where a sharp reversal was seen. Through the month of March, Nifty rallied back to over the 200 MA, consolidating there over a week saw a continuation Rally up to the ‘200 Double Exponential Moving Average’ (200 DEMA) mark, a one way rally of 2430 points.
A strong correction has taken place from this high at 200 DEMA mark, since April 5 and has seen a 1245 points dip since then with the largest one happening on charts on 19th.
Which has again broken the 200 MA mark coupled with the trigger of the Russian statement while struggling to hold the levels on 18th April’s gap down after the long weekend and overshooting commodity prices headed by crude oil. A fresh breakout on the 21st April expiry can be seen as a strong indication of a reversal, as the markets opened above the 200 MA and has formed a strong open Bullish Marubozu candle.
Sector Outlook:
The month of April has seen four expiries till now and is heading towards a monthly expiry next week. These four weeks has seen a lot of stock specific action though the overall move of the indices have been downwards since the first expiry.
The Oil and Gas sector saw a rally owing to the global price hike, PSU stocks like GAIL, IOC saw unprecedented highs while ONGC, BPCL showed decent gains. Owing to this, the paint stocks, like Asian Paints, Berger Paints took a dip along with Chemical stocks like SRF, Deepak Nitrite, Tata Chemicals, to increased production cost.
While fertilizer stocks like Zuari Agro, RFC, Deepak Fertilizers saw a rally owing to reports of a good monsoon.
The Defense sector too saw a sharp rally with the fresh fund allotment by the government to boost home grown defense equipment; so strong fresh moves have been seen in stocks like Bharat Dynamics, BEL, BHEL, HAL, Bharat Forge and BEML.
The sugar stocks like Dhampur Sugar, Mawana Sugar, Balrampur Chini, Dalmia Sugar, Rana Sugar, KPR Mills too have seen rapid growth due to increased exports this year coupled with global shortage in sugar due to production being affected in Brazil and Thailand due to unfavourable weather and also the ethanol play.
Moreover, the textile stocks have seen a spike owing to the removal of import duties on cotton till 30th September, stocks like Ambika Cotton, Arvind, Indocount, Welspun Corp, Siyaram Silks, Monte Carlo have all seen a strong up move.
The banking sector has been comparatively weak however, after the short rally headed by the news of the merger of HDFC and HDFC bank, the banking segment has lost its strength with the same HDFC Twins, now trading at a strong support, have been pulling it down. Axis and ICICI banks have held its ground against the trend though. The fourth expiry saw a good move on the Bank Nifty too and shown good buying on the weekly chart from the 200 DEMA mark asn closing just above 20 EMA at 36911 level.
The result season has seen the IT sector showing the greatest weakness on almost all the counters, with Infosys leading the foray, TCS, Tech Mahindra, LTI, Birla Soft, Mindtree, Mphasis, Persistent Systems. Do keep an eye on these and most of these are now in a strong ‘Buy Zone’ after a healthy correction.
In view of the monthly expiry, the fear of a major downfall loomed till Nifty remained below the 200 MA, the psychological level of 17000 was defended well on the fourth expiry owing to the reversal, it will be interesting to see the trend in the last week as the weekly chart showed the week end with a bullish hammer candle on the expiry day.
Ending Note:
The jolly ride of the market is now over, from hereon, until it is all about targets and levels. Even for the long-term investors, if you plan to invest in stocks, follow the process of marking the stock, identifying its support levels a buy only on the right levels.
The writer is a Technical Analyst and Investment Consultant. Email: samaysshetti@gmail.com
