Telecom Sector Shakes and Stirs the Markets
Be it Indian athletes’ achievements in the Olympics or bulls’ actions in the markets, we are totally in awe of their accomplishments. There has been no looking back for the bulls after breaking shackles from the broad consolidation on August 3. Nifty rallied over 400 points in just three trading sessions, crossing one milestone after the other. Certainly, the bulls deserve a ‘gold’ medal for their performance. But just as every good story has a twist in it, the story of D-Street too has had a sharp turn as has been evident from the dismal performance of the broader markets.
The broader markets remained star performers over the last several months but in the recent times there has been a change in the fate of their performance while underperforming the frontline indices. The testimony of this is that only 61 per cent and 44 per cent of the stock from the Nifty Mid-Cap 100 and Small-Cap 100 have managed to close in the green from last Thursday to this Thursday’s close, while in the Nifty 50 as much as 80 per cent of the stocks have managed to close in the green and about 75 per cent of the stocks of Bank Nifty managed to close in the green. The Nifty Mid-Cap and Small-Cap indices were seen booking profit after moving around 9 per cent and 13 per cent, respectively, in the past 6-7 weeks.
We believe that an extended breather from here on would help to cool off the overbought conditions of these indices and make the market healthy. Furthermore, the way many of the stocks in these categories were moving without any fundamental backing, it calls for a reality check which would help investors to shift their focus to quality names. Hence, the limelight in the coming weeks will surely be on quality names. Meanwhile, one of the major news headlines of the week was related to Vodafone Idea. The stock price has nosedived by more than 25 per cent on a week-to-date basis. Kumar Mangalam Birla has offered to hand over his stake in the company to the government or any other entity that the government may consider worthy to keep the company operational.
As the saying goes, one man’s loss is another man’s gain. While on one hand the investors were seen punishing the stock of Vodafone Idea, on other hand the stock of Bharti Airtel witnessed buying interest.
The stock is up by nearly 7 per cent on week-to-day basis. Moreover, the stock is on the verge of multi-months’ breakout and once it manages to close above the levels of Rs 620-623, it will enter into uncharted territory and the sky would be the limit. Meanwhile, the US markets on Wednesday moved lower as the Dow Jones witnessed a cut of nearly 1 per cent while the S & P 500 corrected half a per cent. The correction was seen on account of disappointing July hiring data and as concerns rose regarding a new wave of corona virus infections. The seven-day average of daily corona virus cases in the US surpassed the peak seen last summer when the nation didn’t have an authorised vaccine, according to CDC Director Dr. Rochelle Walensky who stated this on August 02, citing data published over the weekend.
It would be interesting to watch whether the dip in the the US market would be bought by retail investors or not. Only time will tell. However, we have very interesting data to share about the retail investors of the US who bought a whopping USD 2.2 billion in equities during the rout of July 19, according to Vanda Research. ETFs accounted for 44 per cent of the total retail purchases. Going ahead, buy during the dip mentality would continue to prevail on D-Street. We would advise readers to follow the action of leaders and focus on ideas emerging after forming sound bases with improved relative strength performance. At the same time we recommend taking profit off the table in stocks which are breaking below the key support levels.
