Today’s Action
Nifty, -3.4%; Sensex, -3.4%; Nifty Midcap, -4.4%; Nifty Smallcap, -3.2%; Model Portfolio, +1.9%
Daily Market Review
The Indian benchmark index opened with a gap down, losing momentum throughout the day, and settled near the day's low. The market action during the day formed a bearish candle with a gap down opening. The momentum indicator, RSI, is trending in a downward slope below the 50 level. In the Nifty basket of 50 components, 44 stocks closed in the red, and the top losers were INDUSINDBK (-9.6), ZEEL (-9.5), and EICHERMOT (-7.9%). Nifty traded in the range of 8,807–9,158 and settled at 8,823. At the sector level, barring Nifty IT (+0.9%), all sectors closed in the red. Nifty PSU Bank (-7%), Nifty Media (-6.8%), and Nifty Bank (-6.7%) lost the most. The advance-decline ratio was inclined toward decliners. Of 2,136 stocks traded, 406 advanced, 1,400 declined, and the remaining traded flat. As the loss percentage and volume threshold meet our criteria, today’s session will be considered a distribution day. Total D-day count for Nifty now stands at three.
Market Pulse:-
Nifty, after a flat opening, witnessed heavy selling pressure and closed near the day's low holding significant losses. Further, the index added a distribution day as volume was higher than the previous session, with more than 0.2% decline. Nifty widened its distance from its 21-DMA (9,257) and is currently trading 4.6% below it. In the broader market, both Nifty Midcap and Smallcap closed 4.4% and 3.2% lower, respectively.
Barring Nifty IT (+0.7%), all the sectoral indices closed in the red. Nifty Media (-7.1%), Nifty Pvt Bank (-6.5%), and Nifty Bank (-6.3%) were the major decliners. The advance-decline ratio was inclined toward decliners. Of 2,136 stocks traded, 406 advanced, 1,400 declined, and the remaining traded flat.
Looking forward, we are very close to downgrading the market to an Uptrend Under Pressure. Nifty has three distribution days and is ~10% off highs. Also, key moving averages have been breached. If one more distribution day is observed or market breaks badly, we will change the market status.
The beauty of our CAN SLIM method is that we need not "expect," "hope," or "wish for" with respect to market action. We will take what the market gives us and continue to monitor unfolding conditions. We always look for stocks with strong relative strength. But investors should understand that it is not prudent to blindly buy stocks that have a high relative strength simply because they have been performing well. This is the essence of momentum investing, and it can get you into trouble. Rather, one should base buying decisions on sound fundamental and technical analysis. Only invest in stocks that have strong fundamentals (i.e., good sales, earnings, margins, etc.) and that are breaking out of sound base structures on heavy volume.
Key News
Dr Lal Pathlabs posted its Q4 results today. Revenue was up 0.2% y/y to Rs 302 crore. Profit declined 31% y/y to Rs 32.5 crore. Margin deteriorated 300bps y/y to 19%. The stock closed 0.8% lower.
Maruti Suzuki India re-started production of vehicles at its Gurgaon plant today. The stock closed 7.4% lower.
Cipla announced its submission of an Abbreviated New Drug Application (ANDA) for Fluticasone propionate and Salmeterol inhalation powder to the USFDA. The stock closed 5.3% higher.
What do you think? Please email us any questions or comments.
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Dev Roy
Stock Market Analyst
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