Daily Big Picture: Learn how to invest in stock market during a Downtrend

Daily Market Review

Market Pulse : Downtrend

Nifty succumbed to selling pressure immediately after opening on a flat note. It breached its recent low (11,614) and made a new yearly low of 11,536. The Indian market has been moved to a Downtrend, as it breached its correction low of 11,614. However, in the second half of the session, there was a short-covering rally which helped Nifty to pare some of its losses. Today’s session was volatile due to the expiry of futures & options contracts of the February series.

On the sectoral front, barring Nifty Pharma (+0.6%) and FMCG (+0.1%), all the sectors closed in the red. Nifty Realty (-2.4%), Media (-2.4%), and PSU Bank (-2.3%) were the top decliners. Of 2,135 stocks traded, 594 advanced, 1,189 declined, and the remaining traded flat.

We recommend investors to trim positions, raising cash if possible, or keeping a defensive approach by holding stocks that are resilient in a falling market. Investors should consider booking profits in stocks that have performed well and have advanced 20-25% from their ideal buy points. Even if the market undergoes a small correction, these stocks are likely to fall more. Further, stocks slipping below their respective 50- and 200-DMA on above average volume should be sold. Consider exiting stocks that have declined 8% from your buy price.

Looking forward, we will shift the market to a Rally Attempt if Nifty establishes a bottom and stays above its recent low for three straight sessions. From there, we would prefer to see a follow-through day before shifting the market back to a Confirmed Uptrend. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. The stocks that recover swiftly tend to lead the next run. Investors should maintain a watch list of attractive growth stocks and wait for the market to show signs of a Rally Attempt.

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Performance computations reflect a -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 noted when the issue appeared as “Removed” in the MarketSmith India. For more information, see our Legal disclosures here.

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