Here we are, once again on the final day of the year, reflecting on what could have improved and what went astray. One thing though that life has taught us over the years is not to dwell too much on your decisions, rather embrace and learn from them as you plan your way forward.
In 2023, I fulfilled my long-time dream of leaving the corporate world and dedicating full time to Investing and a few other activities. In a sense, we all share this goal of achieving financial freedom and in the bargain having time for ourselves. Therefore, as we enter 2024, let me put down my thoughts on how I see Stock Markets or Equity as an asset class, and in the process, hope that it helps you in your thinking process as you make your plans and actions for financial independence.
Let me straight away clear up a few things right away:
- No matter what stage you are at in your financial freedom journey, or even if you have achieved it, you cannot overlook Equity as an asset class,
- Act NOW: The Only Time that Matters.
So many intelligent people I know of, have been on the sidelines of the Equity Market all through 2023. I can understand as current markets are unprecedented and give a sense of trying to board a running train and for each day we contemplate, it seems the train has accelerated more and is about to the leave behind platform soon.
So let’s look at broader indices and see if is there still a pocket of opportunities available or if we are very much stretched and need to wait further.
How do you feel if I start by saying we are just starting?
Let’s look empirically at weekly charts. Why Weekly? Because it captures the broader trend and smoothens day-to-day volatility
Disclaimer:
- The charts are for educational purposes only to illustrate my point of view
- Candle colors are not typical Open, High, Low, or Close rather they represent algo system-generated underlying trends based on many technical indicators. The bands within Green and Red bands too relate to trends
Nifty 50 Index
“Bullish Up trend is only 4 weeks old (point D) since Oct 2021″
If you look at the above chart of Nifty 50, then between point A (w/o Oct 18th, 2021) and point B (w/o of June 26, 2023) was just creating a large base and it only broke out at point B, to again test the base support line a point C (w/o of Oct 23, 2023) to finally coming out to see blue sky at point D (Nov 28, 2023).
Without getting into too much technical, understand the area below AB as creating a base or foundation and then market again testing that support to finally come out free at point D. All those grey areas encapsulated between white channels can be considered as foundational pile or columns build to support the building
This also reflects in broader market where Large Caps Blue Chips still haven’t moved much up and are a good place to invest much of your capital
Nifty Bank
“Again Bullish Up trend is only 4 weeks old (point D) since Oct 25 2021”
Same as Nifty 50, Nifty Bank was unable to cleanly come out of point B but finally emerged and tested the foundation at point C, to finally emerge at point D for a clear run. Compared to Nifty 50, Bank Nifty point B was not a clean momentous break-out and hence the reason many private banks have been laggard compared to the broader market. Hence that is space to move your money and a few of these will be covered in my next blog
NIFTY IT
“Still not in Bullish Up trend since Sept 21, 2021”
Unlike Nifty 50 or Nifty Bank, Nifty IT is still lagging broader Indices by 6-8 weeks. Also if you notice, it tried to break too early at Point B with hardly any base and hence it has taken more time to create the foundation or base and still yet to reach point C, unlike broader Indices.
As a case in point, there are few IT stocks that have even gone beyond illustrative point D for a clear blue sky run but the larger IT benchmark is still lagging with a few key stocks such as Infy and Wipro even lagging further,
If you look at COFORGE stock below, you can easily visualize that it has traversed beyond point D now for a clear blue sky run
So here’s a point of caution, which is, don’t just jump into sector stocks based on where they are in my charts. Few are laggards and few are leaders in each pack, do consult with a professional first so that you only ride the leaders
Now that you must have got a fair bit of an idea of what points A,B, C & D pertain to current stages of the broader and sectoral market, let’s skim through the other sectoral or thematic charts quickly to see where else we have opportunities
PSU Bank
“Beyond Point D now and in clear Blue Sky run”
Nifty Auto
“Far ahead of the game as Point A started from 2017 and in clear Blue Sky run”
Nifty Auto is the clear leader on how other Indices may move ahead as it is clear beyond point D. Also note that point A here lies in 2017 and hence had a broader base and hence greater strength to the base it formed and hence early momentum
Nifty Pharma
“On close heals of Nifty Auto and in clear Blue Sky run”
Nifty Metal
“On close heals of Nifty Auto and in clear Blue Sky run”
Although Nifty Metal, ticks all the points of A, B, C & D, the structure doesn’t seem to have a solid base or foundation due to the cyclical nature of the cycle. Hence each stock within this sector is within its cycle
Nifty Realty
“Favorite as has a multistory foundation and is well ahead of other sectors“
Nifty Realty is the clear winner here as going by the previous framework, it has a multistory foundation starting from 2018. A case in point is the area below Area AB on the chart above. Foundation AB is built on top of consolidation from 2018
To keep it short, Infra, Small Cap, Mid Cap, etc are also far ahead of point D and have moved up quite a lot. However, as I said earlier there is a lot of opportunity in Large Cap Blue Chips, Private Banks and select pockets of sectoral leaders who all have a bit of catch-up.
I hope I managed to keep it simple in layman’s language and managed to put my point across on not missing out on Equity as an asset class as that is your road to financial freedom. There is no point sitting on the sidelines. Reach out for guidance.
Thanks for reading and I wish you all the very best for 2024 and years ahead!
