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Mumbai: The Feb-26 low of 14,300 was a major and critical point for the index. It marked not just the end of the Feb F&O expiry, but it was also the date from where the uptrend on the index got stalled and we have seen a heightened bout of choppiness in the indices.
Such a range-bound action with no clear trend visible is typically known as ‘consolidation’ in markets. Now like every trend has a pattern or a behavior attached to it, the same is the case with every consolidation as well.
Every consolidation has a particular behavioral pattern attached to it, which separates the normal consolidation from a consolidation that could still offer profitable trading opportunities.
We have therefore analysed the sector behavior from the Feb lows till Apr 1 to gauge the strongest momentum sectors and the weakest ones.
Fig 1: Sector performance w.r.t NIFTY50 (for the period 26-Feb 2021 to 01-Apr 2021)
The strongest sector in terms of the performer is the metal sector followed apparently by the typical defensive sectors i.e. FMCG, IT and Pharma.
There is a very important observation here that if you look closely the market tilt had shifted to defensives in the past few weeks as the volatility and choppiness increased. Except for metal stocks which moved higher on the back of incremental newsflow and events across the globe.
The weakest link for the market however was PSU Banks which retraced the maximum from other major sectors, followed by realty and media.
Even the Bank Nifty underperformed the Nifty because of the weakness in PSU banking stocks and slight underperformance or stagnancy from the Pvt banks space as well.
For the markets now to move on to a trend mode, I think that the trends have to reverse a bit, where the risk on mode has to come back again with sectors such as Bank Nifty, realty, etc.