Business

STOCK MARKET PART-1 : BOOM (BULL RUN) Vs DOOM (BEAR RUN)

Market Live: Sensex down 300 pts, Nifty below 11,600; IT stocks drag – Moneycontrol.com

In the week starting 25Th Nov’- 29Th Nov’2019 main Indices of Stock Market namely Sensex, Nifty 50, & Bank Nifty made new high multiple times. On 28Th Nov’2019 they break their new high a couple of time to the previous day high.

The market mood is namely measured with Sensex on BSE and Nifty 50 on NSE. What has triggered upbeat market mood (considering rally of Sensex & Nifty) while GDP growth has been reported to 4.5%.

I am listing a few of the events when Stock Market made bull run & Indices made New High or plunged in year 2019.

Events Date Sensex Nifty 50 Bank Nifty
Pulwama 14Feb-19Feb’2019 -681 -189 -318
Air Strike 26Feb-28Feb’2019 -346 -88 -370
Exit Poll 20May’2019 +1422 +421 1310
Results L. Sabha 23May’2019 -299 -81 -118
Results L. Sabha *New High 40125* 12041* 31705*
Central Budget 5Jul-19Sep’2019 -3815 -1242 -4718
Corporate Tax Cut 20-23Sept’2019 +2998 +896 +3810
  4Oct-28Nov’2019 +3457 +977 +4391
All Time High** 28 Nov’2019 41163.8 12158.8 32157

*Stock Market Indices made New High but closed low on profit booking. The Bull continued in further sessions

** Stock market has bull run from 4Th Oct’2019 to 28Th Nov’2019 (Expiry of Nov’2019 Series) and made all time high multiple times in the week starting 25Th Nov’2019.

However, week ended with Sensex losing some shine because of profit booking but not far from new record high.

The above tables indicate stock market reaction to any event or news either creating a bull run or bearish run.

During the period of 5Th July’2019 to 19Th Sept’2019 there was glooming atmosphere and every one seems to be cursing FM N. Sitharaman on social media. Many of the broking houses were feeling the ire of their client who have invested through them as their portfolio have turned into red. I also exited from many good stocks booking losses though today they are performing well.

Frankly, I am not a stock market expert and have never followed stock market all my life. However, after taking a retirement from my professional life in Sept’2019, I started taking interest in stock market primarily looking for investment opportunity and to engage myself. I wanted to keep myself away from my professional expertise which has been very taxing & exhaustive for more than 3-decades. During the last few months my interest grew to understand various mode of trading, fundamental & technical charts and various other parameters related to stock market which I am still learning to understand their pros & cons of market. I have been sincerely studying these trained and noting down various data & details over the last one year.

I am sharing my views after Sensex-Nifty50-Bank Nifty made new high multiple time during week of 25Th Nov-29Th Nov’2019 and closed all time high on 28Th Nov’2019 as all this has happened in front of me on screen.

Now what is the relevance of Indices like Sensex, Nifty 50 & Bank Nifty making new high while there are many more indices which are rarely brought to public attention. Though many will be aware but just for the purpose of this writeup let us understand what is Sensex, Nifty-50 & Bank Nifty are all about. (Regret, I am also not covering other indices)

Sensex 30: Indicates that there are 30 companies in the Sensex Index

Nifty 50: Indicates that there are 50 Companies in the Nifty Index

Bank Nifty: There are 12 Banks (PSU + Private) in Bank Nifty

Nifty 50 also includes almost all the companies covered in Sensex 30. Also 7-Banks of Bank Nifty are present in Sensex 30 & Nifty 50. covered in Bank Nifty.

Weightage of these companies which are calculated on some parameters. Weightage of some of top companies of Sensex 30 & Nifty 50 are listed below.

TABLE-1: WEIGHTAGE OF COMPANIES IN KEY INDICES

S.No. Companies Sensex 30 Nifty 50 Bank Nifty HIGH IN THE WEEK
1 HDFC BANK 12.18% 10.87% 29.5% 1287.00*
2 RELIANCE 11.64% 10.24%   1584.15*
3 HDFC 9.23% 7.51%   2352.00 (2357.85)
4 ICICI BANK 7.58% 6.11% 18.87% 520.00*
5 INFOSYS 6.35% 5.13%    
6 ITC 5.75% 4.53%    
7 KOTAK BANK 5.13% 4.3% 13.28% 1624 (1683.95)
8 TCS 4.98% 4.87%    
9 L & T 4.17% 3.72%    
10 HUL 3.57%      
11 AXIS BANK 3.19% 3.35% 14.48% 763.75 (827.75)
12 SBI 2.91%   10.59% 351.00 (373.80)
13 INDUSIND 1.96%   6.99% 1581.60 (1672.90)
  TOTAL 78.64% 60.63% 93.71%  

*Life Time High

( ): High in last 6-month

Besides above, Bajaj finance, Bajaj Finserve, Bharti Airtel & some of the other stocks has also made their life time high in last two weeks.

From above table it may be observed above listed companies majorly derived the market status. Though other listed companies marginally affect these indices. If you notice & analyse it was due to majorly 8 companies listed in last column market has seen the bull run which in my opinion is only misnomers to judge country financially strength. Stock market mood can easily be manipulated by managing the buying & selling of heavy weightage companies & Banking stocks.

What causes for such sudden bullish & bearish run in the market? Who are the people reacting to it – FII, DII, Brokers or retail traders? Retail investors & part time traders normally get trapped and end up making losses.

We all are aware that when the market after 5Th July’2019 was going down, FII were selling heavily and withdrawing money from stock market till Corporate cut policy was declared. It is well known fact that FII make heavy buying or selling every day. While DII either buy or sell marginally. Most of the time it is observed that they are buying when FII is selling or DII is selling when FII is buying. It appears DII are playing a balancing act to control the market. While FII buy or sell in thousands of crores DII is limited to a few hundreds. The retail traders or investors are ploy in the play and end up losing. In my opinion stock market or casino games are synonymous.

However, I also agree that one can have good returns on their investments if the money is invested in good stocks having strong fundamental & good corporate governance. Besides it is necessary to understand when to exit else one end up making heavy losses. People who invested in one-time good companies like Jet Airways, Deewan housing, Anil group of companies, and many other companies have ended up losing heavily.

Indices indicators shall not be taken as the basis of investment in stock market. To invest one must understand & study the fundamental & company performance into account. As on date stock of many companies of Sensex, Nifty50 & Bank nifty have made life time high & their valuation is also high. The midcap as on date have not performed as much as these companies. If anyone is looking for investing in stock market, one shall make his own analysis before investing as it is your money & you are the affected parties.

Part-2 will covers Investors vs Traders.

Part-3 will cover Trading : Futures Vs Options.

_____________________________________________

BY JAGDISH SETHI (IIT ROORKE)

A “Project Management Consultant” with over 43 years experience has worked on numerous projects in diverse field (Atomic Power Projects, Chemical & Fertlisers, Food and Pharmaceuticals). Last 16 years executed large EPC project for Water Management as Project Director associated with EPC companies.

Twitter Handle: Jagdish Sethi @jcsethi

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