The Rotational Bull Market !!

Read PDF : The Rotational Bull Market

This Bull Market has been Unique in terms of No Single Theme being the Leader for a long period.

If we go back in History.

• 1992 was about Cements and other cos driven by Harshad Mehta.
• 2000 was about IT & Telecom – K10 stocks of Ketan Parekh.
• 2008 was about Real Estate, Infra etc.

Bear Markets after that saw 60% drawdowns.

Post this period  we have seen more and more Rotational Bull Markets in Sectors/Themes but no Central Leadership.

For example

• 2010-2015 was about Defensives. Pharma. FMCG and Quality.
• 2014-2017 saw Smallcaps and Chemicals/China + 1.
• 2018-2020 was about only Largecaps – Hrithik.
• 2020-2022 was about Pharma, Digitization, Covid Beneficiaries.
• 2022-2024 was about Manufacturing, PSU, Power, Defence, Railways and suddenly others took a Backseat.

Even in LargeCaps/Heavyweights we have seen Rotations come and Go. For Example in 2022 we saw a spike in Banks and then it faded off.

I might have missed a few but its very clear its been a Rotational Bull Market ! Also its been very similar across the world too in terms of Rotation.

Rotations have been EV, Digitization, Pharma, Gaming, Artificial Intelligence etc.

What has been the Characteristics of the Current Rotational Bull Market ?

• The Craziness continues to be in Pockets and not in the entire Market Universe. Lot of hated pockets too all the time.
• The Corrections have not been as deep as it would be in 1992/2000/2008.
• We have seen a drawdown of 25% roughly multiple times 2011/2013/2018/2022
• Covid was a 40% drop which lasted a few days below the 25-30% mark. This was a little exception.
• Even through the 25% correction there have been Pockets of Strength which gave Positive Return in a Bear Market. Unlike a Secular Bear Market Drop.

 

Without going into the Macro Reasons of Liquidity, Fed, Dollar Printing/Govt Spending etc one should focus on how one can do to capitalize on Rotations.

If one gets the Rotation right there can be solid Outperformance in Sideways say a 5-8% correction or even a deeper 15-25% correction Period too.

 

Over the last many years I have focused on Sectoral Rotation as our Central Theme for Identifying Ideas.

Some of the example reports.

1) Opening Up Theme in 2020

https://nooreshtech.co.in/2022/03/nooreshtech-weekly-insights-18th-march-2022.html

2) Power Sector in 2020

3) Textiles in 2020

Sector in Focus - Low Downside Huge Upside - Lost Decade or Two to be Reclaimed - www.nooreshtech.co.in

 

4) PSU – The Most Hated Promoter is Changing Trend.

The Most Hated Promoter Group Changing Long Term Trends www.nooreshtech.co.in

 

5) Banking – The Future of Nifty50 is on Banks.

https://nooreshtech.co.in/2022/06/future-of-nifty50-banking-on-banks-free-detailed-presentation.html

 

6) Gas Logistics -

Gas and Trasportation - Thematic (1)

 

7) Kirloskar Group.

https://nooreshtech.co.in/2022/09/kirloskar-group-stocks-on-radar.html

 

A lot of this Sectoral Rotations come from two Approaches.

1 ) Relative Strength.

2) Hated and Underperformance.

 

Ideally one expects to add more once you find Relative Strength in Hated and Underperforming Sectors.

 

So simply put there are two screens we run all the time.

1) Sectors/Themes showing Strong Relative Outperformance. ( Works better when Markets Go Sideways )

2) Sectors/Themes hated and underperforming for a Long Time but showing Bottoming out structures.

 

This approach makes a lot of sense and works well if one continues to do it. But the big problem is our focus on looking and Benchmark Indices and just missing out what is happening underneath in the Broader Market.

 

Let us take some examples

1) In 2021 end – There was madness in Tech, Digital, Pharma etc. One would end up discussing the madness in Nasdaq 100 , Zoom, Peleton etc globally and CDMO, SMS , Digital etc in India.  But missed out on the structural changes in Power,Manufacturing , PSU , Capital Goods etc after 10-15 years.

2) In 2022 – One ended up discussing about Russia-Ukraine and the correction globally. Nifty fell 20% +. Missed out on Metals, Defence, Railways, Shipyards etc

 

Many such examples. Like for now we all talk about the madness in Railways, Defence, PSUs etc and will miss out on the next Rotation.

 

For now the Nifty50 saw a good rally post Election Dip and has now corrected 3-5% from the recent highs. Good chances it may get into a Consolidation/Pause/Correction.

 

The Right Time now to again look for Rotations!! 

 

A lot of hated Sectors/Themes/Groups/Stocks would still be there.

We have also started looking for Small Micro Themes with very few listed names in Niche Sector. For example earlier it was Gas Logistics cos we covered like Aegis Logistics and Kirloskar Pneumatic.

Shipping is a sector but only one large name like GE Shipping.

 

Some Sectors/Themes which have come up on our Screens.

Disclosure – Biased and Invested in some of them.

 

Relative Strength & Outperformance.

1) Agri and AgroChemicals .

2) Textiles

3) Oil and Gas

4) Logistics

5) Insurance

5) Pharma

 

Hated but on Radar.

1) Large Cap Banks

2) Diagnostics

3) Media

 

Videos that may Help

 

I have made a video series on how we approach Sectoral Analysis with Upsurge team. It is available on the below link

https://www.upsurge.club/course/technical-and-fundamental-analysis?invite=TECH-FUND

Also, other video on How to strategize across market cycles

https://www.youtube.com/watch?v=q46BmH5SaLI&t=18s&pp=ygUnc3RyYXRlZ2l6ZSBhY3Jvc3MgbWFya2V0IG5vb3Jlc2ggbWVyYW5p

 

Market View

• Nifty 23300-23500 ( Exit Poll highs) remains an important support for a normal 5-8% correction from top.
• Nifty 21000-21500 is the band below which one may review the Medium to Longer Term Stance. As its the low band of last 6-8 months as well as Election Day Low.
• Expectation is we may consolidate between 23300-25000 band for some time going forward.
• One of the reasons that Nifty does not look like breaking major supports of 23300 or 21500-21000 is the major underperformance of BankNifty post covid as well as in near term.
• Banks and Financials still remain 30-35% of the Nifty50.
• Simply put time for consolidation. Globally also similar consolidation structures. Review if we break 23300.

 

Conclusion

• The Rotational Bull Market should continue. A normal correction of 5-8% or even 15-20% is part of such Bull Markets.
• The Sectoral / Themes can give super outperformance in such Corrections and Sideways move.
• Some Sectors and themes have already given first indications as discussed in above.
• New Sectors/Themes could emerge in coming weeks.
• The Longer Term stance remains Bullish.