Today’s Action
Nifty, -0.5%, Sensex, -0.7%, Model Portfolio, +0.4%; MSI Ind 47, -0.8%, Nifty Midcap, +0.1%, Smallcap -0.3%.
Daily Market Review
Market Status: Rally Attempt Continue reading “Daily Big Picture : Nifty Drops Sharply in the Last Hour; IT and Financial Services Stocks Drag”
Today’s Action
Nifty, -0.5%, Sensex, -0.7%, Model Portfolio, +0.4%; MSI Ind 47, -0.8%, Nifty Midcap, +0.1%, Smallcap -0.3%.
Daily Market Review
Market Status: Rally Attempt
The Nifty fell 0.53% today and closed below 10,850 level. Investors seem more cautious ahead of inflation numbers and IIP results, due today. Moreover, concerns regarding NBFC crop up amid a report that Indiabulls Asset Management Company and DHFL Pramerica Mutual Fund have seen their assets fall by more than half in the December quarter.
With respect to sectoral performance, Nifty Realty (-1.4%) witnessed more selling pressure followed by Nifty Financial Services (-1.0%), IT (-1.0%), Bank (-0.8%), and FMCG (-0.7%).
The market status remained unchanged. Nifty is trading well above its key support levels. We will look for a legitimate follow-through day, after which we will upgrade the market to a Confirmed Uptrend.
The advance-decline ratio was in favor of losers. Of the 2,068 stocks traded on the NSE, 733 advanced, 1,002 declined, and 333 remained unchanged.
Stocks in News
Hindalco Industries: The Company announced its December quarter results. Its net profit, including its Utkal Alumina unit, increased 47% y/y to Rs 713 crore aided by higher copper sale and lower finance cost. Its revenue rose 8% to Rs 11,938 crore, beating estimates. The stock fell 0.6% today.
HEG: The Company reported its Q3 results that beat estimates. Its revenue increased 121% y/y to Rs 1,865 crore aided by higher volumes due to increased crude steel production in China. EBITDA increased 136% to Rs 1,313 crore and margins expanded 427bps to 70.4%. Net profit was up 153% to Rs 867 crore. The stock was up 8.2%.
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Mr. Anupam Singhi (CEO, William O’Neil India) sheds light on why Indian shares were muted ahead of inflation data.
We all know the importance of market status in determining an investor’s stance in the CANSLIM style. It not only helps you realize gains by being aggressive when the risk is minimal, but also protects you from unwarranted risks of markets. When the market is in a Confirmed Uptrend, it is the best time to make most of your gains. This is when most breakouts are successful, and hence an investor carefully following the patterns of his/her stocks to realize big gains. But how can you pre-empt the probable weakness in market so that one can lock-in gains and play defensive with less or no exposure? A distribution day can provide a systematic and credible approach to do that.
What is a Distribution Day?
A distribution day is when a market representative index (for example, Nifty 50) loses more than 0.2% in a day, with volume higher than that of the previous session. When a distribution day occurs, it hints that big institutional investors are exiting or reducing their positions in the market. Institutional activity is what moves any market, especially in India where retail participation is small.
How does it help in sensing market weakness?
When the market is in an uptrend, the intensity of market weakness is determined by the distribution day count. An investor keeps count of all valid distribution days (as per above definition) during an uptrend. Successive distribution days imply a weakening market. But what threshold of distribution day count is enough to say the market is under pressure? A distribution day count of 2-3 is benign and usually normal in an uptrend. But when the count goes to 5-6, one should prepare to get his/her positions trimmed.
Distribution Day Expiry
Even though a distribution day hints that institutions may be liquidating their positions, it loses its impact after 25 trading sessions. A distribution day is also removed from the count after the index rallies 5% above that day’s close. When the Nifty 50 started in a Confirmed Uptrend from July 10 onwards, it experienced its first distribution day on July 18 (D1) and the second on August 10 (D2). The third, fourth, and fifth distribution days occurred on August 29 (D3), September 4 (D4), and September 11 (D5), respectively. D1 had already expired by then, putting the total distribution day count at 4. But the market started showing weakness with the fifth distribution day count (D6) on Sept 18.
Related: Distribution Days Come In Different Shapes and Sizes
What do you think? Please email us any questions or comments.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
Performance computations reflect a time-weighted rate of return and includes a brokerage of 0.5%. All holdings are rebalanced to equal rupee amounts daily. Dividends are not considered in computations. Percent gains and losses are calculated for all issues that remain on the “Current Holdings” at the end of the day. For stocks that were added to “Current Holdings”, the basis used to calculate the percent change is the price noted when the issue appeared as a “Current Holdings” in MarketSmith India. For stocks that were removed, the selling price used to calculate the percent is the price note d when the issue appeared as “Removed” in the MarketSmith India. For more information, see our Legal disclosures here.
PSU Bank and Pharma Stocks Drag Nifty; Dr Reddy and M&M among Top-LosersToday’s Action Nifty, -0.5%, Sensex, -0.4%, Model Portfolio, -1.4%; MSI Ind 47, -1.1%, Nifty Midcap, -1.7%, Smallcap -1.8%. Daily Market Review Market Status: Rally Attempt Benchmark indices continued their bearish run for the second day in a row. Nifty gave up its 10,900 level and settled 0.5% lower, weighed by PSU bank, pharma, and automobile stocks. Dr Reddys Laboratories (-5.6%} and Mahindra & Mahindra (-5.1%) were the top losers. The market status remained unchanged. Nifty is trading well above its key support levels. We will look for a legitimate follow-through day, after which we will upgrade the market to a Confirmed Uptrend. The advance-decline ratio was in favor of losers. Of the 2,084 stocks traded on the NSE, 528 advanced, 1,232 declined, and 324 remained unchanged. The market is likely to be volatile during the week as market participants will closely track domestic macroeconomic data as CPI, IIP, and WPI are scheduled this week. Stocks in News Continue reading with a MarketSmith India Premium subscription… To Read Detailed Reports including Stock Recommendations, Idea Lists, Evaluate Stocks etc. Subscribe to MarketSmith India. |
