Highlights
- Nifty gains 12.6%; median stock rises just 6.2%
- Emkay identifies seven additions to its Leadership pool
- Pharma, Auto and stronger banking stocks in focus
Nifty Outlook: The Nifty 50 has surged 12.6 per cent over the past four weeks, helping India move from the worst-performing to the best-performing major market in dollar terms. However, the rally has been heavily concentrated in index stocks, with the median Nifty 250 stock gaining just 6.2 per cent during the same period, according to Emkay’s weekly technical research note, Nifty 360.
The brokerage highlighted that the gap between the Nifty’s performance and that of the median stock is the widest since at least 2019. It also noted that heavyweight stocks such as Reliance Industries, ITC and HDFC Bank are witnessing rebounds within existing downtrends.
According to Emkay, short-term trends have turned positive for 78 per cent of stocks, while only 27 per cent are currently in a medium-term uptrend.
The brokerage described the current market phase as a “recovery attempt, not yet a new uptrend.”
Nifty outlook: What does Emkay’s technical research indicate?
However, the brokerage said the medium-term trend remains down, although it is showing signs of improvement. The long-term uptrend remains intact but is currently undergoing a correction.
According to the report, a higher low during the next market decline would confirm the beginning of a fresh uptrend.
Stocks in focus: Emkay identifies new market leaders
Emkay’s technical research showed a broad improvement in market trends during the week, with 116 stocks moving into stronger technical categories, while 13 slipped into weaker categories.
Seven stocks entered the brokerage’s Leadership pool:
– Authum Investment & Infrastructure (AIIL)
– Indian Hotels (INDHOTEL)
– Multi Commodity Exchange (MCX)
– Punjab National Bank (PNB)
– Radico Khaitan (RADICO)
The brokerage identified its Leadership pool and Emerging leaders categories as preferred areas during the recovery attempt, noting that these stocks are already rising across different timeframes and outperforming the benchmark.
It also identified 50 stocks in its Turning up category, predominantly from banking and financial services, as potential future leaders if the medium-term trend confirms.
Emkay also identified several stocks that have lost their long-term uptrend.
Meanwhile, Britannia Industries, Max Healthcare, MRF, SRF and Vedanta have shifted into the Bounce in downtrend category.
NTPC and Hindustan Petroleum also slipped out of the Turning up category.
According to the brokerage, the Bounce in downtrend category accounts for 31 per cent of the tracked stock universe, including several heavyweight stocks.
Emkay suggested treating rallies in this category as opportunities to sell into, while identifying the Correction in uptrend category as an area to consider if the broader market recovery fails.
India becomes best-performing major market: Emkay
The report highlighted a sharp improvement in India’s relative performance against global equity markets.
India moved from 11th to first position among 11 major markets on three-month returns within three weeks.
The country also emerged as the best-performing market among the 11 on one-month, three-month and six-month returns in dollar terms.
Over the past four weeks, Indian equities gained 13.9 per cent in dollar terms, compared with declines of 11.2 per cent in the MSCI Emerging Markets Index and 10.2 per cent in the Nasdaq.
However, Emkay described the improvement as a catch-up rather than established leadership.
The brokerage noted that India had lost approximately 30 per cent relative to emerging markets over the year to May and has recovered roughly 40 per cent of that loss.
The report also highlighted a sharp decline in India’s correlation with global markets. The relationship fell from its normal level to almost zero over five weeks, reaching its lowest level in 10 years.
Crude oil falls 16%, rupee strengthens: Key global developments
Emkay identified several global developments accompanying the recovery in Indian equities.
Brent crude declined 16 per cent last week, reversing its October spike, although prices remained 18 per cent higher over three months.
The US 10-year Treasury yield declined 7 per cent over four weeks, while the Indian rupee appreciated 2.4 per cent against the US dollar.
The report also noted sharp corrections in Asian technology-heavy markets, with Taiwan declining 22 per cent and South Korea falling 24 per cent over four weeks.
According to Emkay, capital rotation away from Asian technology stocks has helped India’s relative market standing.
However, the brokerage flagged that the India VIX rose 21 per cent over four weeks despite the equity market rally, indicating continued hedging activity rather than full investor conviction.
Which sectors are in focus?
Emkay’s technical research favoured leading stocks from the pharmaceutical and automobile sectors, along with stronger banking stocks.
The brokerage noted that lower crude oil prices and softer yields favour oil-sensitive and interest-rate-sensitive sectors.
While the automobile sector is already responding to these developments, the report identified banks as a sector to monitor if the recovery broadens.
The brokerage maintained that the current phase remains a recovery attempt, with confirmation of a fresh market uptrend dependent on subsequent price action.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)