Have Market Sentiment Changed To Green?

Market Update - Monday, 13 Apr

This marks the start of a new week, although it is a shorter one as Tuesday is a trading holiday. The weekend could have been very nice if a negotiation had been reached, but that was not the case. However, hope is still not out. It appears to be a two-week ceasefire, and perhaps the first round of negotiation never goes through.

In the last seven sessions, the market, especially in mid and small caps, has shown resilience. Every day it opens but closes higher on the Nifty. Out of the last seven sessions, six have closed higher. In an environment of extreme fear and anxiety, this suggests a different story. It indicates that the market is getting resigned to the idea that it has reached a level below which it is not easily going to go. This is a virtue of strength. If the market were truly weak, it could have fallen gap down today and stayed flat to fill the gap, but it did not.

• On the absolute numbers, the market lost 0.86%, but that is not alarming at all.

• Nifty Junior lost 0.77%, and its midterm trend is becoming positive.

• Mid caps lost only 0.58%. There is significant hope that the situation will get resolved, which is what the market is currently pricing in. If it does not get resolved over the next two weeks, a fall will certainly occur.

• Small caps were down 0.41%, showing a wide range on the candle today and a good recovery, with short and midterm trends remaining positive.

• Bank Nifty was also down only half a percent at 0.55%, staying in the same range as previous sessions.

• Gold is down marginally by 0.31% and has recovered reasonably well. Oil, of course, has gapped up at 8.7%.

• Now, not only is Iran blocking the Strait of Hormuz, but the US also wants to block it, though the specific details are already well-known.

Other Market Triggers

• HDFC Bank, Reliance, Bajaj Finance, TCS, Maruti, Eicher, and ITC were some of the big names driving the markets down.

• In the Nifty Next 50 heat map, the auto sector bore the brunt today, with Chola Finance, Union Bank, Motherson, CG Power, and Bosch all down.

• The Adani Group and the energy group in general were doing well, as were solar stocks. United Spirits, Pidlilite, and BPCL were also among the decliners.

• The mover of the day is Zydus Wellness, which is targeting a $500 million face wash market. The stock has done very well throughout the entire month of March while the rest of the market was bleeding, finishing up 5.7%.

• Thermax is also performing very well, rallying 6% again after a three-day rally and approaching a key resistance level.

U.S. Market Updates

• In the previous session on the US markets, ServiceNow, Accenture, Salesforce, Costco, and Nike were thrashed between 7.5% and 3%.

• The Dow Jones was down 0.5%. Surprisingly, despite being a key player in the current conflict, US markets are not really going down and remain a stone's throw from all-time highs.

• The NASDAQ 100 also saw great gains in semiconductor stocks, with AMD, ASML, AVGO, Nvidia, and Amazon doing well while others were flattish.

What to watch next ?

• The chart for the micro cap 250 index around 11 o'clock showed that despite a huge gap down, these stocks were the first to recover and maintain their position.

• This is a clear signal that micro caps and the lower part of the market are not willing to go down rapidly yet.

• In contrast, large caps are the first to succumb to negative overnight news, likely due to institutional selling. This represents a change where mid, small, and micro caps are leading while large caps are lagging.

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The numbers are in, and they tell a story of incredible resilience. Data recently presented by Peter Mallouk regarding the S&P 500 performance from 2009 to 2026 offers a masterclass in long-term investing. Over these 17 years, the index has surged by a staggering 1200%. However, that growth wasn't a straight line up; it was a journey filled with dips, dives, and moments of panic.

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Since 2009, the market has weathered 32 different corrections of 5% or more. If you look at the historical timeline, the "scary" moments were frequent and significant:

Currently, the S&P 500 is experiencing a 7.8% correction. While it feels uncomfortable, history shows this is simply the "median" noise of a healthy, functioning market.

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To succeed, you must view corrections as an integral part of the investment journey, not a sign of the end. There will always be a "narrative" or a news cycle suggesting the market is finished. History proves otherwise. The investors who grew their capital 12x over the last 17 years weren't the ones who guessed the bottom; they were the ones who had the stomach to stay invested through the 7% to 35% drops.

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