- Nifty is moving higher but the midcap and smallcap end of the market look exhausted.
- Nifty was up 0.22% today but the BSE Mid-Cap index rose just 0.1% while the S&P BSE Small-Cap index lost 0.43%
- The bad news: Large Cap Bullish rally is happening at the expense of broader market. More declining stocks than advancing stocks
- The real change that has happened this month: Nifty taking off after trading sideways for 2 months (June-July)
- Lots of Large cap Bank stocks have rallied dramatically over the last few days. RBI expected to announce monetary policy tomorrow.
- Will RBI do anything dramatic to change the trajectory of the market? Majority of the market watchers think no. The benchmark rates expected to be unchanged with the repo rate at 4 per cent and reverse repo rate at 3.35 per cent.
- The cost of money has now structurally come down in India with 10 year bond yield at 6.2%. This is causing a liquidity shift from Fixed Deposit to Equity markets.
- This is just the start of the trend and no wonder the theme – Financial market access everybody is crazy about
- You need to analyze the big picture first & then develop a system that aligns with your understanding of it
- One of the primary objective of reading price action is to get the big picture idea ahead of time. I discussed lots of stocks over the last 12 months that belong to this theme
- Penny stocks do not become multibagger. Vodafone stock is another great example of why one should not get excited just on hope
- One should never trade based on feelings. Hope is not a winning strategy
- If you are a Price Action trader/investor, then believe in the collective wisdom of the market and more wealth is created when the market is convinced about the trend than confused about it.
- Charts don’t lie and there is no fun buying a stock that’s moving nowhere and belongs to a sector where there is confusion. Example: PSU Banks. This is PNB Bank
- Sometimes the best trades are not the winning ones that put money in your pocket; sometimes they are the ones that get you out of the market at the right time
- One of the goals of the policymarker is to have a stable currency. RBI has done a great job when it comes to INR stability. Here’s USDINR chart over the last one year – between 72 and 75
- One of the other underappreciated story: Exports Growth.
- Traders trade stock behaviour. This is ITC. Everytime it declines to 200, there are people with hope that it would take off
- The large cap stock that created wealth in 2021: Tata Steel. It took off from 600 on Budget day and never looked back
- You do not go wrong substantially if you get the theme right. I was bullish on SAIL on the budget day. SAIL was at 58 back then, today at 143. This was how SAIL looked back then
- Lots of times stocks trade sideways for a long long time. Take HCL Tech as an example – trading in a band between 900 and 1060
- It is the job of the policymaker to keep the market excited all the time and every good news is welcome
- Retro tax amendment is a message to investors that India is committed to predictability in taxation ~ TV Somanathan, Secretary of Finance
- One learns the most from mistakes, not successes…. Paul Tudor Jones
- Read Price Action Stories, Case Studies and Opportunities on smarketpremium.com
ChartSource: Chartalert.com
Please share your comments on what you think of market observations, market and trading in general
Fundamentals don’t drive stock prices.
How people perceive those fundamentals drive stock prices.
As a market participant/trader, keep an eye on how the market views the fundamentals than being obsessed with your own version of fundamentals. It means look at the price action and it tells you without bias what the market thinks about the stock. Once you read the price action, go and find the reason why the market has such a view on the stock, and be aligned with it.
This is the level one mind training every individual requires to be in sync with market thinking. This is the real fundamental of Investing. I call it Science of Stock Price Action
If price action fascinates you – then Science of Stock Price Action is a great place to start.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers