Stock Market Analysis 20 Dec 24: Big Fall in Stock Market, Portfolio Stocks, Crash, 2EV Stocks, WAAREE Energies

Stock Market Analysis 20 Dec 24

Hello friends, welcome to Digital News Information, and good evening! Today, the Sensex closed down by 1,176 points at 78,042, while the Nifty fell by 364 points to close at 23,587. Similarly, Bank Nifty dropped by 816 points to close at 50,759.

Why has the market fallen so much?

A common question that arises in our minds is why our portfolio stocks, which had not been impacted much earlier, are now showing significant losses. What has happened to the markets overnight, both in India and globally?

To understand such a steep overnight fall, you cannot simply rely on basic data points. A deeper market analysis is essential. I have explained this in detail to provide clarity on whether this decline will continue or stabilize.

Comparison of yesterday and today’s market:

Yesterday, our market opened with a gap down. At that time, all global equity markets, including S&P 500, Nasdaq, and other U.S. markets, experienced a sharp fall of 3%. Similarly, European and Asian markets also witnessed significant corrections.

Despite this, our market showed resilience after the gap-down opening. Today, the market remained relatively stable until around 10:45 AM. However, after that, a heavy sell-off was observed, particularly in mid-cap and small-cap stocks, which fell more than large-cap stocks.

Fall in mid and small-cap stocks:

When mid-cap and small-cap stocks fall more than large-cap stocks, it is a sign of potential further decline in the market. This fear-driven selling in the mid and small-cap space creates uncertainty for investors.

Impact on the IT sector:

Yesterday, Accenture reported strong results, leading to a 7% rise in its stock. This positively impacted Indian IT ADRs like Infosys and Wipro, which gained up to 4%. However, today, profit booking was observed in the IT sector, indicating caution among investors.

Role of FIIs and other key factors:

Foreign Institutional Investors (FIIs) sold shares worth approximately ₹4,200 crores in yesterday’s market. For the past four days, FIIs have been consistent sellers, which has added pressure on the markets. Moreover, U.S. 10-year bond yields have risen to 4.54%, offering risk-free returns, which is attracting global investors away from equities.

Dollar-Rupee relationship:

The rupee continues to weaken against the dollar. When investors convert dollars into the weakening rupee and invest in Indian stocks, it involves a higher level of risk, which many are hesitant to take under current conditions.

Future outlook:

Until U.S. bond yields decline and the dollar-rupee relationship stabilizes, Indian markets will likely remain under pressure. However, if bond yields drop from 4.54% to 3% or 2%, there could be a positive inflow of foreign investments into Indian markets.

Indian Stock Markets and Global Impact: A Detailed Analysis

Friends, it is essential to understand the recent downturn in Indian equity markets and the global factors influencing it. Currently, foreign institutional investors (FII) are engaged in significant selling in our markets. The rise in the dollar index and bond yields is disrupting the flow of investments into Indian markets.

FII Selling and Market Situation:

Whenever the dollar index and bond yields increase, the flow of investments moves out of Indian markets. Large-scale selling by FIIs is being observed. However, this is not a structural issue with our markets; rather, it results from changes in the global economic scenario and fund flow dynamics.

Impact of the US Economy:

Recent GDP data from the US has also influenced the situation. GDP growth has been around 3.1%, which is better than expected. With a strong economy, the Federal Reserve does not feel the need to cut interest rates. Additionally, unemployment figures are lower than anticipated, reflecting the robustness of the US economy.

Dollar and Rupee:

The strengthening of the dollar index and the weakening of the rupee have further impacted the markets. The rupee has weakened to levels of 85.3, which could benefit export-oriented sectors such as IT and Pharma.

Performance of IT and Pharma Sectors:

IT and Pharma companies, which derive a significant portion of their revenue from the US, could benefit from changes in currency exchange rates. For instance, 60% of Infosys' revenue comes from North America. If the dollar strengthens by 2% and the rupee weakens by 2%, these companies could see increased profitability purely due to currency fluctuations.

Impact on Import-Based Industries:

On the other hand, industries that import products such as gold, electronics, and raw materials may face negative consequences as they have to make payments in dollars.

Market Outlook and Strategy:

According to yesterday’s market analysis, stability was observed after the downturn. However, it is unlikely that the market will rally upward quickly. In the coming days, the market is expected to remain range-bound.

Analysis of Recent Market Decline

Friends, I don’t want to say much, but I urge you to take a closer look at this situation. After today’s initial volatility, the market tried to move upwards again after breaking resistance but failed. Even after multiple attempts to rise, the market faced resistance and then sharply declined. Although there were several instances of buying in the market today, the selling pressure from large investors overpowered it and drove the market decisively downward.

Understanding the Market from Two Perspectives:

This market movement might be linked either to the Sensex, where it could have been driven this far due to expiry, or it might be a planned move for the mid and small-cap segment. If we saw a 0.5% to 1% sell-off in mid and small-cap stocks today, it could be attributed to Sensex expiry. However, selling was observed not just in the Sensex but also in mid and small-cap stocks, indicating sustained selling pressure in the market.

Key Levels and Market Direction:

The key levels discussed earlier in the blog are still relevant for the market. If the market continues to fall, we might see levels around 23,300–23,200 in the coming days. This could be a zone where investors might find an opportunity to invest. Currently, the market is around 24,800. If it drops to 23,200 again and rises back to 24,800, this zone will become crucial. If this level is breached, the next significant level will be 22,500.

Opportunities in Theme-Based Investments:

In recent times, several investment themes have emerged. This presents an excellent opportunity for investors waiting to invest in specific themes. For example, textile-related and water-related themes could perform well. Additionally, focus on hospital stocks, as they haven’t seen much correction even today.

If you’re wondering whether it’s a good time to buy these stocks, conduct some research and add them to your watchlist. To minimize risks, consider investing in pharma and healthcare, specifically hospital stocks. Even if the market declines in the future, these stocks are likely to remain stable and protect your portfolio from significant losses.

Lack of Strength in the Market:

Despite multiple attempts to rise, the market lacked any real strength today. Until the market reaches and sustains 23,800, it’s hard to maintain a positive outlook.

Impact of FIIs on the Market:

Foreign Institutional Investors (FIIs) have significantly influenced the market’s decline. Today, FIIs sold stocks worth approximately ₹3,600 crores. This isn’t surprising, as FIIs had already sold ₹4,200 crores in recent days. Additionally, mutual funds have shown limited support to the market.

As long as bond yields remain elevated and the dollar index stays strong, FII inflows are likely to remain a challenge. This issue may persist in the Indian equity markets for the foreseeable future.

Analysis of Siemens and Market Decline:

Today, we observed that companies like Siemens, with a market capitalization of ₹2-2.5 lakh crore and ₹1.5 lakh crore, recorded a 10% decline. What caused this? On examining internally, Siemens made certain announcements related to their business during their conference call. These announcements highlighted three key points that impacted the market today.

Three Key Points by Siemens:

Reduction in Government Spending: Siemens stated that government spending has decreased, possibly due to the elections. However, they believe this spending will pick up in the second half. This is a positive indicator.
Decline in Private CapEx: Capital expenditure (CapEx) by the private sector has reduced. While semiconductor and battery sectors are seeing good investment, traditional technology-related spending by private companies has declined. For now, this can be overlooked.
HVDC and VSC Technology: Siemens highlighted that the HVDC technology segment of their business has significant growth potential in the future. However, regarding LCCC technology, they believe it’s not a major technology in India. Additionally, Siemens is not focusing on VSC technology. These three points combined have created selling pressure on Siemens and other capital goods companies.

Impact on the Capital Goods Sector:

Due to these statements, there has been a sell-off in Siemens’ stock as well as other companies in the capital goods sector. This indicates wavering investor confidence in this segment for the time being.

Russia's Major Breakthrough in Cancer Treatment:

Let’s discuss a scientific breakthrough related to cancer treatment. Russia has claimed that they have developed a cancer vaccine using mRNA technology. This vaccine targets cancer cells by activating the immune system.

MTAR Technologies Ltd.: Announcement of Clean Energy and Aerospace Orders:

Today, MTAR Technologies Ltd. announced securing ₹226 crores worth of orders in the clean energy and aerospace sectors. Despite the selling pressure in the market, the stock has increased by 8-9% and closed with an overall 6% positive gain.

Key Order Details:

**₹191 Crores Order from Bloom

Energy:** MTAR Technologies received a ₹191 crore order from Bloom Energy, related to their Clean Energy segment.

Aerospace Orders: MTAR Technologies also received multiple orders in the aerospace sector, totaling ₹35 crore.

2 EV Stocks You Should Know:

If you’re interested in the Electric Vehicle (EV) sector, WAAREE Energies Ltd. is a stock to keep an eye on. The company has been in the limelight for its significant involvement in solar energy, contributing to the transition to cleaner energy solutions.

Conclusion:

In conclusion, the stock market has experienced a significant decline recently due to various global and domestic factors, including the rise in bond yields, selling by FIIs, and negative sectoral impacts. However, opportunities still exist for investors in select sectors, including pharma, healthcare, and clean energy. Stay cautious and keep a close watch on key levels and sectors.