Know The Hidden Effects Of The War

Market Update - Thursday, 12 Mar

Today’s discussion focuses on the hidden costs and impacts of war that are not immediately obvious. Often, when observing conflict, the quick conclusion is that if oil remains stable, everything will be fine. Unfortunately, the reality is not that simple.

Observations across many fronts show that second and third-order impacts of the war are already occurring. The first and most prominent is oil prices. The LPG crisis involves two main issues: availability and price, which constitute the first-order impact. However, the next hidden impact already starting to surface is inflation.

• Looking at the charts, the Nifty fell for a ninth day, losing about 2000 points or 8% to 9% during this crisis, landing closer to the 23,500 mark than its previous 25,500 level.

• In contrast, the Nifty Junior showed more resilience, recovering almost all losses to end down only 0.11% without breaking its three-day low.

• Mid-caps and small-caps also sustained better than the Nifty, down 0.23% and 0.39% respectively, without breaking previous lows.

• However, Nifty Bank dropped 1.4%, hitting a new recent low.

• Meanwhile, precious metals like gold, priced at 16,299, and silver, up 1.46%, are starting to perk up.

• Emerging markets may see relief once the dollar index falls from its recent high.

Other Market Triggers

• The Nifty heat map showed significant losses in auto, finance, infrastructure, and cement stocks, while energy and power stocks saw some green.

• Nifty Next 50 featured more gains, driven by PSUs and power stocks, even as real estate and some auto stocks were hit hard.

• NTPC was a major mover, rising 12.59% as investors shifted toward green energy over fossil fuels.

• Adani Total Gas also gained 7%. Conversely, the auto sector saw a 3% smashdown, with stocks like Exide, Samvardhana, Uno Minda, and Bharat Forge dropping.

U.S. Market Updates

• In the US, the previous session saw gains for Oracle, Chevron, Intel, Conoco, and Exxon, despite the Dow Jones, Russell, and S&P 500 closing lower.

• The NASDAQ 100 showed a mixed bag with no major losses.

What to watch next ?

• Regarding oil, Thursday morning saw a big jump to 102 from a previous close of 94, though gains were reduced by midday.

• This volatility suggests that while the crisis isn't over, sellers are pushing back on every rise, which could be a positive sign for the markets.

• Worldwide fertilizer prices are already skyrocketing, and by-products like sulfur, used in numerous industries, are following suit.

• Many of these by-products will simply not be easily available, regardless of the price.

• Furthermore, if inflation continues to climb, the narrative that the US can cut interest rates will be thrown out the window.

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What To Read This Week ?

📈 The Fundamental Trap: When Growth Doesn't Mean Gains

We’ve all been told that "in the long run, the stock price follows earnings." But what happens when the business triples its revenue and the stock price drops by nearly 75%?

Using Happiest Mind Technologies as a sobering example, we see a massive disconnect. The stock crashed from the ₹1400–1500 range down to approximately ₹780 (correcting the figure for market accuracy), even as the company’s top line expanded significantly.

If you were looking only at the balance sheet, you might have been buying all the way down, catching a falling knife while the market was screaming "Stay away!"

🧩 The Great Disconnect: Why Numbers Aren't Enough

Fundamental analysis tells you what to buy, but it is notoriously bad at telling you when to buy. A company can be fundamentally sound but "technically" broken.

The market is a voting machine in the short term. If big institutional money is exiting or if the initial valuation was driven by a speculative bubble, the strongest revenue growth in the world won’t save the stock price from a correction. Relying solely on fundamentals ignores the most important signal in the room: Price Action.

🛡️ The Solution: Adding a Technical "Safety Layer"

To avoid getting trapped in a "Value Trap," you don't need to abandon your fundamental research—you just need to filter it. Think of fundamental analysis as the engine and technical analysis as the GPS.

Before committing your hard-earned capital, consider applying these "Technical Guardrails":

• The 200-Day DMA Filter: Never buy a stock that is trading significantly below its 200-day Daily Moving Average. This ensures you aren't fighting a long-term downtrend.

• The 52-Week Low Rule: Avoid catching a falling knife. If a stock is languishing near its yearly lows while the broader market is rising, there is an underlying weakness the balance sheet isn't showing yet.

• The Trend Confirmation: Wait for the stock to make "higher highs" and "higher lows" on a weekly chart before entering, regardless of how cheap the P/E ratio looks.

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