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IT Stocks Lead the Market

June 08 2020
Nifty, +0.3%; Sensex, +0.2%; Nifty Midcap, +0.5%; Nifty Smallcap, +1.2%; Model Portfolio, -1.4%

Market Pulse Confirmed Uptrend

After opening around 200 points higher, Nifty moved sideways in the first half of the trading session. However, it quickly succumbed to selling pressure and pared most of its gains to end just 25bps higher. During the day, it tested its 100-DMA (10,304) and failed to close above it. Historically, 100-DMA has been a crucial level to watch for Nifty. Half of the Nifty50 constituents ended in the green. Gail (India) (Nse) (+7.1%) and Indusind Bank (Nse) (+6.9%) led the advancers whereas  Zee Entertainment Ents. (-4.4%) and Shree Cement (-4.1%) led the decliners.

On the sectoral front, it was a mixed reaction. Nifty IT Stocks (+1.8%) and Nifty Pvt Bank (+1.3%) were the major advancers. On the flip side, Nifty Media (-1.7%) and Pharma (-1.4%) were the major decliners. The advance-decline ratio was inclined toward advancers. Of 2,146 stocks traded, 1,264 advanced, 574 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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