Most people were waiting for the year 2020 to get over. Well, for an obvious reason – people wanted the ‘COVID-19’ year to get over.
There is a strong hope that 2021 will be better. There is another section of people who never wanted 2020 to get over. Ever. They were perhaps scared of the notion that the end of 2020 might mark the end of the great bull run.
On the contrary, nothing like that has happened yet.
The bulls are still going strong and taking the bears head-on. Stupendous returns for those who waited patiently! Doomsday predicting bears from March 2020 are now supercharged bulls, who are talking about 15000 Nifty.
Well, this is how the game of greed and fear is!
During this week, Nifty50 opened at 14104, made a high at 14366, low at 13953, and finally settled at 14347. The strong closing, very close to the weekly high, reflects the strong ongoing momentum.
On a sectoral front, strong momentum continued in almost all sectors.
Let’s discuss a few notable sectors:
Strong sales figures were reported by auto companies for the month of December.
COVID-19 has been a blessing in disguise for the auto sector. People now prefer to move in their own vehicles.
Good momentum continues in tractor divisions of Mahindra & Mahindra and Escorts. Hyundai India has reported the highest sales ever, registering 25% year-on-year growth. Has the auto cycle finally turned? Just wait and watch.
Image: Passenger Vehicles Sales in December 2020 | Source: Invest Yadnya
Metal stocks performed well in the week gone by.
The very nature of these companies is cyclical and once the upcycle begins, the momentum doesn’t fade away easily.
Steel prices have been on an uptrend, supporting the Nifty metal index. Iron ore prices have touched the roof. Between June and December 2020, iron ore prices have more than doubled.
Image: Top Gainers on 8th January | Source: NSE
The rise in iron ore prices is related to external factors in China, Australia, and Brazil. China has been increasing its iron-ore stockpile for a while now.
Summarising the trend- ‘Make hay while the sun shines!’
Image: TATA Steel Net Profit | Source: Invest Yadnya
Nifty Midcap 50 Index
The Nifty midcap 50 index has decisively crossed its lifetime high made in January 2018.
If you were an active participant in stocks in Jan 2018, you would have seen the pain of the midcap index cracking after exposure to the Nirav Modi scam.
However, the ones who systematically kept SIPing in the Midcap 50 index, have made handsome gains.
Image: Nifty50 Midcap Index During This Week | Source: Moneycontrol
One development that catches my eye is the movement in real estate stocks. The Government of Maharashtra has recently announced a reduction in builder premiums by 50%.
First, a reduction in stamp duty, and now the reduction in builder premiums! Is the Government committed to providing a fillip to the languishing real estate sector?
Well, only time will tell it! However, the recent move is expected to reduce housing prices in Maharashtra by about 3-4%.
Do note that housing in Maharashtra is one of the most expensive in the country.
A reduction of 3-4% matters to middle-class homebuyers. Realty stocks haven’t done well compared to broader markets over the last many years.
This is a good trend to track. Prices of a few realty stocks including Oberoi Realty, Kolte Patil developers & Godrej Properties reflect the optimism.
The ongoing rally is broad-based with almost every stock & sector gaining. It is easy to ignore fundamentals and fall for momentum traps in junk stocks.
Like Buffett has rightly said once: “Only when the tide goes out, do you discover who’s been swimming naked”.
None of us can say with certainty about when the liquidity tide will turn away. However, ensuring a low exposure to stocks with sub-par quality is very much within one’s control.
A periodic introspection of the stocks held in a portfolio is a MUST during such rallies.
Data to look for in the coming week
|12-Jan||Industrial Production YoY NOV||3.6%||5%|
|12-Jan||Manufacturing Production YoY NOV||3.5%||5.2%|
|12- Jan||Inflation Rate YoY DEC||6.93%||6.6%|
|14- Jan||WPI Inflation YoY DEC||1.55%||1.8%|
|15- Jan||Balance of Trade Final DEC||$-9.87 B||$-15.71 B|
Thank you, until next time. Wish you a joyful & profitable next we