Daily Big Picture : Nifty Finds Support Near 200-DMA; ICICI Bank Gains, Havells Declines After Quarterly Results

Today’s Action

Nifty, -0.8%; Sensex, -0.5%; Model Portfolio, -1.1%; Nifty Midcap, -1%; Smallcap, -1.1%

Daily Market Review

Market Status: Uptrend Under Pressure

Nifty opened marginally in the green, led by gains in the Bank Nifty Bank, after ICICI Bank (+3.3%) reported better-than-expected results for Q1 FY19. Selling pressure intensified and Nifty declined 1% off highs and found support near its 200-DMA, closing 0.8% lower. Though Nifty was down more than 0.2%, but volumes were low compared to Friday’s session, thereby escaping a distribution day. The current distribution day count remains at four.

In the recent weeks, Nifty has not been able to hold gains and market breadth is shrinking, which indicates a weak market.

On the sectoral front, barring Nifty IT (+0.4%), all the sectors closed in a negative territory. Nifty Auto (-3.5%), Media (-3.3%), and Metal (-3%) were top decliners. In the broader markets, Nifty Midcap (-1%) and Smallcap (-1.1%) were also under selling pressure. The advance-decline ratio was skewed toward decliners. Out of 2,110 stocks traded on the NSE, 1,274 declined, 504 advanced, and the rest remained unchanged.

Looking forward, we would like to see Nifty taking support near its 200-DMA (~0.2% below the current level). A rebound from the current level or its 200-DMA on above-average volume, without any further addition of distribution days will be positive for the market. We would change the market status to a Downtrend if the Nifty breaches its 200-DMA.

Key News

State Bank Of India: The bank has cut deposit rates on various tenors. The rates have been reduced by 50–75bps for up to six months of deposits. For longer tenors, rates are reduced by 20–35bps. The cuts have been made due to falling interest rates. The stock was up 0.4%.

Havell’s India: The stock fell 4.7% as Q1 FY20 results missed expectations. PAT was down 16.3% y/y. Revenue grew 4.5% y/y to Rs 2,717 crore, while EBITDA fell 10.3% y/y to Rs 279.2 crore, and margin contracted 170bps to 10.3%.

Pnb Housing Finance: The Company said in a regulatory filing that it has raised $100M from International Finance Corporation (IFC) to finance the purchase of affordable housing projects. The stock was down 1.3%.

What do you think? Please email us any questions or comments.

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Learning Article : Cutting Losses Is like Buying an Insurance Policy

The policy of limiting losses in stock market is similar to paying insurance premiums. You reduce your risk to exactly the amount you are willing to take. Granted, many times the stock you sell will immediately turn around and go up. You will probably get very agitated and think you made the wrong decision if that does happen.

Let’s say you bought insurance on your car last year and didn’t have an accident. Does that mean you wasted your money? Are you going to buy the same insurance this year? Of course you are! You buy insurance just in case – to protect you from the remote possibility of a serious loss.

It is the same for the winning investor who cuts losses quickly and closely; he/she wants to protect against the possible chance of a larger potentially devastating loss from which it may not be possible to recover. Some people have even damaged their health agonizing over declining stocks they were holding. In this situation, it is best to sell and stop worrying.

If a person bought XYZ stock last year at Rs 400 and it drops to Rs 300, he/she may think to buy it more and average the price down. Now, when it drops to Rs 200, he/she may add again. And finally, when it drops to Rs 75, that person might be out of market after incurring huge loss. So, never argue with the market.

“When you make a mistake in the stock market, the only sound thing to do is correct it. Don’t fight it.  – William J. O’Neil

Small losses are cheap insurance and the only kind of protection you can buy on your investments. Even if a number of the stocks move up after you sell, which many of them surely will, you have accomplished your critical objective of keeping all your losses small. And you still have your money to try again for a winner in another stock.

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.

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