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Gemstone Equity Research & Advisory Services

The Year That Was & Sectors To Look At In 2019

Though the last trading session of 2018 remained rather dull with the Markets ending on a flat note, the year itself remained in stark contrast to its last trading day. Throughout the previous year, the NIFTY remained affected by events, both global and domestic, in nature. Among others, it included threat of trade war, Fed continuing to rise interest rates in the US, sharp spikes in Crude prices followed by equally sharp declines, volatile domestic currency, regional conflicts in Asia Pacific with tensions escalating between US and North Korea, State Elections in India, and  also the sudden resignation of RBI Governor which was seen as an action of protest against increasing Government interference.
 
Because of all these factors, Markets in general remained immensely volatile. NIFTY, that had once returned over 12% on YTD basis, settled the year with YTD Returns of just 3.15%.
 
 
The sector analysis as at end of December 31, 2018 does not paint a pretty picture. Out of 18 Sectors under review, 13 Sectors ended with losses, 1 Sector remained flat and only 5 Sectors reported gains.
 
 
If we shift our analysis from pictorial view to actual figures, the table shown above throws up interesting insights.
 
It shows that NIFTY Realty, Media and Auto Index remained top 3 under-performers as they lost 33.02%, 25.92% and 23.10% respectively on YTD basis. While NIFTY IT, FMCG and Financial Services performed best gaining 23.78%, 13.65% and 10.60% respectively.
 
As we step into 2019, we must remember that the coming year is likely to remain extremely stock specific in nature. Volatility is likely to remain an integral part of the trade as we will face general elections going ahead.
 
 
 
The above two charts show the Relative Strength (RS) of various sector indexes against the broader markets, CNX500. These sectors are likely to relatively out perform the general markets and will help investors give a resilient start to 2019.
 
As evident, the Consumption, IT, FMCG, Financial Services and Bank NIFTY are in continuing uptrend as the RS is seen in a firm uptrend. RS line is also seen above its 50-Week MA which acts as further confirmation of continuing out-performance. Apart from this, PHARMA, Infrastructure and PSU Banks are see ending their long-term downtrend, flattening its trajectory and reversing its trend. All these sectors, collectively, are likely to perform much better when bench-marked against the broader markets and are set to offer resilient relative out-performance going ahead.

Milan   Vaishnav, CMT, MSTA,
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA,   Canada | STA, UK)  | (Research   Analyst, SEBI Reg. No. INH000003341)

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