Slicing and dicing recent market movement
On Monday i.e. on August 24, 2020, the frontline indices have touched their six-month high and Sensex closed at 38,800.
Last time, Sensex traded at such a level on February 26, 2020. In these six months, we have seen the market going on a roller-coaster ride. First, it was a fall of almost 40 per cent and after that, the rise of more than 50 per cent.
In this journey, not all were lifted in the same way. There are some companies that slipped further while some managed to come out with flying colours. If compared to February 26, 2020, there are 148 companies that have doubled while out of 2,407 companies, 1,362 companies are trading higher than what they were trading on February 26, 2020.
|
Per Cent Gain
|
Number of Stocks
|
|
Less than (-)25%
|
267
|
|
(-)25% and 0
|
773
|
|
> 0 and < 25%
|
654
|
|
> 25% and < 50%
|
334
|
|
> 50% and < 100%
|
231
|
|
> 100%
|
148
|
The above table clearly shows that most of the companies lie between negative 25 per cent and positive 25 per cent. The rise clearly shows that the current rally is broad-based and not many companies have lifted the indices. Since the beginning of 2018, we were witnessing great polarisation where a handful of companies were leading the rally of the stock market.
Sectors that are leading the gain are healthcare, chemicals, and IT. The following table shows the sectors that are performing well:
|
Sector
|
Average Change (per cent)
|
Number of Companies
|
|
Healthcare
|
64
|
144
|
|
Telecom
|
54
|
22
|
|
Agri
|
38
|
85
|
|
Crude Oil
|
37
|
24
|
|
IT
|
37
|
126
|
|
Chemicals
|
35
|
175
|
|
FMCG
|
27
|
99
|
|
Plastic Products
|
22
|
71
|
|
Media & Entertainment
|
21
|
63
|
|
Iron & Steel
|
20
|
77
|
|
Power
|
20
|
31
|
|
Infrastructure
|
17
|
68
|
|
Trading
|
17
|
99
|
|
Electricals
|
16
|
32
|
|
Mining
|
15
|
13
|
Going ahead, we are not seeing any sign of fall in the market despite lofty valuations.
In the last month, we are seeing that even FIIs have started to participate. The month of August has pumped in USD 5.43 billion, which is the highest since October 2010. Besides technically also, we can see that Nifty has formed the ‘golden crossover’ pattern, which is seen as a bullish sign.
A ‘golden cross’ is formed when a stock or an index’s 50-day moving average crosses above its 200-DMA. Going by history, there is a little more than 50 per cent chance that the market may gain further.