You Are In Danger For "Averaging Down"

Market Update - Thursday, 26 Feb

With just one more day to go before the end of the month, the market remained very flat today, absolutely not moving at all. It feels as though there is a wait for a specific cue, but that cue does not seem to be coming.

One of the primary topics of discussion is the FII trend. Foreign Institutional Investors (FIIs) were continuous sellers throughout the last 15 months. However, as of 26 February, despite two more days of data remaining, they are up by 4300 crores month to date. This represents the highest monthly inflow in 17 months, suggesting a change in FII flows.

Looking at market headings, it was another flat session, acting almost as an inside session to the large candle seen on Tuesday.

• The Nifty moved 0.06%, while Nifty Junior inched up gradually by 0.33%, showing a nice momentum trend.

• Mid-caps were up 0.58%, and small-caps were absolutely flat at 0.07%.

• The Nifty Bank stood at 0.24%, and its lack of movement is not a great sign for those indices.

• Gold inched up 0.46% today, while silver was down by 2% at 270,724.

Other Market Triggers

• There were good gains in Shriram Finance, State Bank of India, ONGC, Maruti, Adani Ports, and Eicher.

• Auto stocks are starting to run up as month-end numbers approach, and some pharma stocks also saw gains.

• Conversely, Zomato continues to bleed almost daily, and losses were noted in Coal India, HDFC Bank, and Bajaj Finance.

• In the Nifty Next 50 heat map, gains were seen in Bank of Baroda, certain capital goods and oil companies, Pidilite, Solar Industries, VBL, and Vedanta.

• Hindustan Zinc, IRFC & United Spirits lost some ground.

• In the mover of the day segment, Tejas Network moved up 16.7% after a long time following a contract signing with NEC. The stock has taken a beating in recent months.

• KSB Limited also moved up 9.24% to an eight-week high.

U.S. Market Updates

• The US market had a very good previous session, with indices up 0.5% to 1.3%. Big gainers included Intuit, Netflix, Capital One, Citigroup, and Palantir, rising 4% to 6%. Some of these stocks could be part of the Weekend Investing U.S. stock strategy.

• The NASDAQ 100 heat map showed a big move from Netflix and a general green screen for other stocks.

What to watch next ?

• The data shows that gold ETF inflows have crossed equity mutual fund inflows this past month. This doesn't mean money is leaving equity, but rather that gold investment is rising significantly.

• While equity is often thought of as the larger chunk of household wealth, Indian households actually hold $5 trillion in gold compared to approximately $1.1 trillion in equity.

• A remarkable move by SEBI today involves a new circular allowing actively managed equity funds to park more money in gold and silver. This unshackles fund managers who were previously restricted.

• For example, a fund mandated to invest 60% in equities can now utilize the remainder in these other asset classes. This indicates a positive undercurrent for gold and responds to fund manager demands to avoid losing out on this hedge, a topic discussed at Weekend Investing for nine years.

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What To Read This Week ?

The Anatomy of a Value Trap: Why Price Structure Matters

It is one of the most common stories on Dalal street : stock that was once a market darling falls from grace, and investors—blinded by past glories—keep "averaging down" all the way to the bottom. Today, we are looking at Indian Energy Exchange (IEX) as a textbook case of why fighting the tape can destroy your portfolio.

The Rise and the Structural Collapse

Between 2020 and 2022, IEX was a multibagger, soaring from roughly ₹40 to the ₹310 range. However, the subsequent crash saw it tumble to ₹110.

While it has seen occasional "dead cat bounces" toward the ₹230 level, the stock is currently languishing around ₹122-₹123.

The technical damage is severe:

• Trendline Breakdown: The long-term support line has been completely shattered.

• The 200-DMA Resistance: For three years, the stock has lived below its 200-day Daily Moving Average (DMA). While there have been minor spikes, it has failed to sustain any momentum above this key indicator.

The Danger of "Averaging Down"

Because many retail investors and even some fund managers saw the ₹300 price tag, they perceive ₹120 as a "bargain." This is a psychological trap. They continue to buy, hoping to lower their average cost, ignoring the fact that the price structure is currently broken. There is no evidence of a reversal—no higher highs, no higher lows, and no base formation.

Fundamentals vs. Technicals: The Great Divide

You might have done your homework. You might love the company’s moat or its business model. But if the price is telling you, "Don't buy me," you should listen. Even if you are a fundamental investor, your entry should be guided by technical health. Buying a "falling knife" out of ego or stubbornness is a quick way to see capital erosion.

Wait for the structure to change. Let the stock prove itself by crossing the 200-DMA and breaking out of its downward trendlines before you commit your hard-earned money.

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