Nifty Escapes Distribution; Financial Stocks Drag the Market

Posted Date: June 04 2020

Today’s Action

Nifty, -0.3%; Sensex, -0.4%; Nifty Midcap, -0.08%; Nifty Smallcap, +0.01%; Model Portfolio, +0.6%

Market Pulse Confirmed Uptrend

After opening on a flat note, Nifty quickly advanced over 70 points to make an intraday high of 10,123. However, it quickly succumbed to selling pressure and closed the day 32bps lower. Today’s session puts an end to the longest winning streak since November 2019. Nifty escaped a distribution day as today’s volume was lower compared with the previous session. 46% of Nifty50 stocks ended in the red, with Asian Paints (-4.6%) and Bajaj Finance (-4.0%) being the major decliners.

Barring financial related sectors, all sectoral indices closed in the green. Nifty Media (+4.1%) and Nifty Pharma (+3.1%) were the major advancers. The advance-decline ratio was slightly inclined toward advancers. Of 2,120 stocks traded, 953 advanced, 834 declined, and the remaining traded flat.

The beauty of our CAN SLIM method is that we need not "expect," "hope," or "wish for" with respect to market action. We will take what the market gives us and continue to monitor unfolding conditions. We always look for stocks with strong relative strength. But investors should understand that it is not prudent to blindly buy stocks that have a high relative strength or simply because they have been performing well. This is the essence of momentum investing, and it can get you into trouble. Rather, one should base buying decisions on sound fundamental and technical analysis. Only invest in stocks that have strong fundamentals (i.e., good sales, earnings, margins, etc.) and that are breaking out of sound base structures on heavy volume.

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