Indian stock markets continue to climb multiple walls of worry. We have been in a corrective mode since September 2024. We had a strong rally from June 2022 from levels of 15000 to around 26000 in September 2024. Usually after such strong rallies there will be periods of pause and consolidations. Reasons for these kind of corrections will be multiple and often follow one another.
When after strong rallies we face periods of correction lasting as long as a year, or sometimes more, say like 1.5 years, its often frustrating. Even before the rally from 15k to 22k, we had a corrective phase of nearly 9 months. But post that we had a breath taking rally.
I think we are in last stages of the corrective phase , or might have completed the corrective phase and in early part of next leg of rally. At times like these it makes sense to take a view of next 1-2-3 years and try to uncover the bigger winners. The current environment is not too favorable for trading as a lot of bullish patterns fail, or take much longer to play out and that too after a lot of whipsaws.
The good thing about the current market is that the q1 results season is over and we can clearly identify which companies have given good results and what kind of commentary management is providing. That helps in finding companies to invest in for next few quarters atleast.
When markets regain their bullish momentum, they will brush aside all the worries that are plaguing them now. Among sectors that are looking good are financials (its a big basket including public and private banks, NBFCs, insurance cos, wealth management cos, brokerages, so on and so forth) , autos, consumption, etc. There will be many more sectors breaking out . over time.
We can use these kind of corrective phases to do deep dives ( to the extent possible) into good companies and maybe uncover few gems for next leg of rally.
One can also keep updating on the knowledge front by updating ourselves by learning new things. Personally I did an Elliot wave course and found it to be useful. More on that later in another post.
Elliot Wave is a very polarising topic. Those who practice it donāt look at anything else, and those who hate it donāt want to look at it. We have a thread with EW ( and some other stuff) in Stageinvesting thread.
Learning EW was always in my bucket list. I read a few books also on the subject and had a basic initial understanding of what the whole thing was.
So I subscribed to Kedianomics, an advisory run by Sushil Kedia who is often seen a lot on TV and is quite active in Twitter etc.. My main aim in going for subscription was to learn the topic and I had a subscription gifted to me by my sister and it was from December 2023 to December 2024. My experience with this service was very disappointing. The accuracy was very poor with a lot of calls going wrong and frequent change in stances. So I had started losing faith in the whole theory of Elliot waves.
After this experience I stumbled on to indiacharts run by Rohit Shrivastav. I opted for monthly subscription which was very cheap and started enjoying his services. Meanwhile I received an offer from his office to enrol in Elliot wave teaching course and I enrolled it. His course consists of basic technical analysis, Elliot wave course and trade set ups.. The course basically consists of pre recorded videos of tutorials, each video of around 10-20 minutes with explanation of each concept followed by another video of examples of the concept etc.. Plus there are tests after every topic to re inforce the learnings. It took me around 1.5 to 2 months to complete the course.
I found this course thoroughly enjoyable because the whole complex topic of Elliot wave was simplified and put up in video tutorials. ( this is not a recommendation for the course but personal experience shared based on my learnings). I saw changes in stance regarding market direction from Rohit also in his services, but my main aim is to learn the topic and hence I enjoy whatever he has to offer. Maybe he is a better teacher than a practitioner.
Now I am in the phase of applying Elliot wave knowledge to my other accumulated knowledge of charts, and I am enjoying the whole process. I am still in the process of validating the efficacy of Elliot waves. Like all other methods of technical analysis, this method also has its drawbacks and flaws, but if combined with other methods, it probably provides an edge to technical analysis.. Because of SEBI restrictions, I am not able to post live charts, but I will share older charts ( more than 3 months old) to try and share my knowledge of the topic.
I remember from some of your posts that sometimes a sector gets into very bullish mode (driven by business prospects) and the stock prices skyrocket as if there is no upper limit and then starts underperforming after a great run.
The capital markets linked stocks have been on a bullish upswing in the past few months (AMCs in particular). Even with big corrections, flows into mutual funds are only going up and we already have 2 AMCs having AAUM above 10 Lakhs Crores with the third one not far behind. Do you feel their current price movement pattern is similar to whatās described above?
Hitesh Sir, PE of small cap index ~31 and when it started rally in 2023 it was ~20. so dont you think that still we will see time correction or price correction, so that valuation normalize and we can be ready for next bull market. May you plz add your feedback on this aspect.
I think what you are referring to is sector rotation. This usually happens once stock markets have entered strong rally mode.. We often see one or other sector keep rallying for 3-6 months and then cool off/correct or go sideways. By that time another sector already has started on its rally..
The other theme is the megatrend kind of rally where sectors throw up winners which can rally for a few quarters atleast, usually 2-5 years.. We have seen something like that in transformers and allied space in last few quarters. Here there are always chances of picking up multibaggers. AMC companies as you mention are in such a phase and with good reason. Last I heard, monthly SIP were close to 28000 crores.. Add to that private family offices, PMS, retail folks like you and me, and the amount can be quite big.. And it can keep growing..
Using PE in case of small cap index is not an accurate way of valuing a sector. Small cap index constituents keep going through earnings rallies and drops. And these are often bigger as compared to those seen in the steadier business of large caps. So if a couple of quarter earnings are affected, the small cap index PE will start looking very expensive.
Personally I like to focus more on individual companies and that has been more fruitful and less prone to noise.
Thanks for your insights. It indeed looks like India is moving from āSavingsā to āInvestmentā mindset that makes the market flush with inflows and this trend can go on for some time as long as the returns are greater than traditional options like FD, PPF, Bonds etc.
However, on the valuations front, the listed companies are already trading at quite high valuations. I know prices can go up irrationally in a bull market. Do you have view on the valuations of AMC companies in general? The top listed AMC (HDFC) is currently at 15 % of its latest Q-AAUM.
Also, do you have views on the pre-fabricated / pre-engineered steel construction sector? They seem to be in an early stage of adoption by the industry. Some listed companies in this space are Interarch, M&B Engineering, Pennar Industries etc
The earnings growth from the third quarter of the financial year 2025 has not been that great and unless the growth comes back to the level of financial year 2024, I donāt think the market will go up.
Most of these AMC companies have run up and have not corrected much despite run ups. Part of the reason is good results and partly due to expectations of good run way for growth. These kind of stocks at most will under go sideways correction, where they keep trading within a range without giving up too much. And once markets stabilise, or any company specific trigger/newsflow materialises, upmove resumes.
Regarding the PEB segment, I had a look at Pennar Inds when I saw above kind of sideways move during a previous correctioin, but did not follow up on the company. But looking at the kind of numbers shown by these companies, the sector seems to be in a sweet spot. I have not done any detailed study to offer any further views.
Given SMBCās backing and access to ultra-low-cost yen funding, along with Yes Bankās guidance of 12ā15% loan and deposit growth for FY26 and ROA targets of 1% by FY26 and 1.5% by FY30, is there scope for meaningful future gains as the bank continues its gradual turnaround?
Sir, Greaves cotton, fill RHP for Greaves mobility.
Greaves mobility contribute 24% in revenue. But EBITDA always in negative. It is good for G.C.
Ev 2,3 wheelers are future. So it is good for company or not. What are effect on it.
As a shareholder of GC what I do. Bec I bet on GC for EV 2, 3 wheelers.
GC also has engineering, retail,finance,technology, Excel business. So what I do. Pls guide
Yes Bank has had a āchange in managementā with SMBC taking over the bank. So it fits one of the mental models for multibaggers.
But I see two problems with the bank..
First is equity dilution. There has been massive dilution in equity over the years in an effort to keep the bank afloat.
Second is clean up job. Since SMBC has recently taken over the bank, it will need to clean up the past mess the company was in. We have to watch what kind of cockroaches are hidden and come out, or whether the balance sheet remains squeaky clean.
Personally I donāt have a view on the bank, and hence have avoided it.
@hitesh2710 sir, I really appreciate the way you present your views hereā¦The mental model lens is a powerful way to filter opportunities, but what I like most is how you balance that with a dose of realismā¦ āEvery things is connected with each otherā.. āChange in managementāā is one of the proven mental model to find out the good stocks, but at the same time we also need to consider the severity of the issue in the hand, what it will take to become turnaround story and what surprises we may get on the way when you say āwhat kind of cockroaches are hidden and come outā ā¦
Highlighting just two problems helps us to look the bigger pictureā¦dilution and clean-up of existing mess. This helps to prioritize issues and look at the stock in holistic manner. This is helping many on the forum in shaping the thought process: Your straightforward explanation is doing exactly that for many of usā¦ Thanks again.
Hitesh ji
We have not heard about your latest assessment on your long term holding HBL and Time techno. Do you continue to hold . It will be helpful to know the technical as well as fundmental aspects on these two. Thank you.
Hello Hitesh Ji - What are your views on GMDC with regards to the Rare Earth and Critical Minerals point given the Goverment push on Atmanirbhar Bharat ?
The Company has announced several aggresive Capex intiatives - for Fiscal 26 and 27 with targets for FY30 - with execution remains key.
Going forward do you see it remain as a cyclical business as it has been in previous years or do you see it pivoting ? the share price has been on an upward trajectory for the last few quarters now
My views on HBL should be considered as biased as I have been invested in it and it remains one of my top holdings. Coming to the details about the company, the annual report provides a lot of granular details about the various businesses of the company and their prospects. Most interesting aspect for me was management articulation on what kind of business they want to be in.. They donāt want to be in mass market products, they dont want to be in businesses where they are no 3, or 4, or lowerā¦, they dont want to be in business which requires heavy capex.. They specifically want to be in businesses where they can exploit technology gapsā¦ And till date they have walked this philosophy.
Order book for Kavach is good, and with company having received Kavach Version 4.0 approval, order execution also should be expected to keep pace. As mentioned by management, defense sector holds a lot of promise,
Overall it seems a good story for next 2-3 years.
Time technoplast seems to be executing as per their promise. They keep experimenting with newer sectors and newer products, so its interestingly poised. I had exited it sometime back as I found HBL below 500 more attractive to add as compared to holding Time techno. Nothing as such against Time techno. But I dont see Time techno growing in excess of 20%..
Hello Hitesh ji, what are your views on current market situation? As we know history repeats itself so does chart pattens. If we check prev bull n bear phase, nifty made low in june 2022 and again march 2023, pe ratio followed the pattern. We also saw nifty went below 200 dma in mar 2023 before the bull run started. Do you see similar trend following sir? I think one last dip is pending before the start of bull run. We may also see nifty pe going down as eps may grow from this quater because of gst cuts and repo rates. Please share your words of wisdom. Thanks
