Nifty Smallcap 100 & BSE Smallcap Index make new All Time Highs but Most Stocks do not.
Nifty corrected from 26300 to 23200. A 10-12 % correction. Could not even come back to 25000.
Smallcap Indices both BSE Smallcap and Nifty Small 100 made new all time highs but most stocks did not.
This Failure to Breakout generally leads to a TimeWise Correction if you look back in history. Example 2015/2021/2022/2024
It can become a deeper or longer correction if something breaks Globally.
Like in 2022 we saw Russia-Ukraine War which made it deeper in 2021 or the Longer version due to Demon/Trump in 2016.
For confirmation of a Bigger Correction we need the Break of Recent Lows.
We can call the end of Correction if we sustain above the Recent Highs like we did in 2024 post Elections.
In the current situation of High Valuations and Growth Concerns a Timewise Correction would be Normal. This time not many Large Sectors look interesting & cheap but Many Stocks in Micro Sectors do.
Like I have said in this detailed video - https://www.youtube.com/watch?v=q46BmH5SaLI&t=4829s Our Outperformance by using a mix of Techno-Funda, Sectoral Focus & Deep Value comes in a Sideways Market. Lets pray we get it right this time too.
Conclusion and What Next
We go back to the 2021 post where we called a Time Wise Correction very similar to 2015. Check this Post – Back to 2015 written in November 2021
In such a scenario the bigger question is What Not to DO !!
Below is a excerpt of the Post in 2021.
Most covid beneficiaries are still below or just close to 2021 highs. Pharma, IT, Digital etc. ‘
Amine stocks, Speciality Chemicals, Diagnostics, IT etc still lower than 2021 while Smallcap Index has almost doubled in 3 years.
Also post that we got a massive run in PSUs, Capital Goods, Real Estate, Power, Manufacturing etc ( We could pick most of them)
These names outperformed in 2022 with positive returns but went parabolic in 2023 rally.
What Not To Do
Be Careful in the Big Winners/Hype of this 2023-2024 Rally.
They are Capital Market Beneficiaries, Defence, Railways, SME, EMS, Jewellery, Renewables etc.
Not necessary they may fall but may no more be the Top Performers.
Reducing Allocation in the Big Winners of this Cycle is tough given the Growth Prospects/Narratives but being a little Mindful of Valuations my help in thinking clearly.
Avoid the Temptation to play Bounces in Sectors that have given up Leadership. 30-40% drop sectors.
What to Do
Focus on the Underperformers and watch for confirmation via Price Action or Results in coming 2 quarters.
Focus on where Valuations are comfortable. Like PSUs/Manufacturing were very cheap in 2021. This time around its more Stock Specific instead of Sector Specific.
Be open Minded and Ready to Shift into New Leaders.
In a Dull Market/Timewise Consolidation – Its time to Read Books, Listen to Good Videos, Read Reports and do everything needed to get Better at your Investing.
Be Patient and keep Researching.
Do follow me on Twitter/X for More Insights and Reading Material
https://x.com/nooreshtech
Some of the Recent Posts from X
Low Volumes across the Broader Markets. Slow Grind.
Smallcap Indices recovered to new highs but most stocks did not.
Overvalued, Hyped & Narrative Stocks can see accidents in the Result Season.
Focus on UnderPerformers making Base. Add/Shift here on Price Action or Results
— Nooresh Merani (@nooreshtech) December 28, 2024
State of the Indian Market
Trend of Strong Price-Volume Action in Stocks around fund-raise -Warrants, Preferential Allotment, and QIP, seems over. No more pop-up trades. Many stocks are below the Issue Price.
Trend of Strong Price-Volume Action in New Stocks Post Listing.
— Nooresh Merani (@nooreshtech) December 28, 2024
Thread on Cement Sector
https://x.com/nooreshtech/status/1872569549494837519
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