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๐ Market Kya Lagta Hai
Nifty 50 ๐ป-0.64%
Midcap 150 ๐ป-0.48%
Smallcap 250 ๐ป-1.70%
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Sectors in Focus
Major Corporate Developments This Week
- Sadhana Nitro Chem: NCLT approves company's resolution plan for acquisition of Calchem Industries (India); deal for 95M rupees || Company says acquisition of Calchem Industries will be completed by 27 Jan, 2025
- Dixon Technologies: Company unit Dixon Electro Appliances Pvt Ltd, together with Nokia launches manufacturing of fixed broadband devices || Collaboration between company unit and Nokia aims to leverage advanced technologies to deliver speeds of up to 1 Gbps to homes via fixed broadband devices
- HAL: Company gets contract for avionics upgrade of Dornier-228 transport aircraft
- DCX Systems: Company got orders worth 4.6B rupees from M/s. Lockheed Martin Global Inc, USA for supply of electronic assemblies
- BEL: Company wins order worth rupees 500 Cr
- Powergrid: Company acquires Khavda PS1 and KPS3 Transmission Ltd. for transmission project in Gujarat
- ITI: ITI Limited-led consortium emerges as L1 for Rs. 3022 crore BharatNet project for middle mile network
- Inox India: Company secures landmark contract from Highview Power, UK for world's largest liquid air energy storage project at Manchester || Company to supply 5 x 690KL vertical tanks for the project
- Reliance Power: Company gets notice from Solar Energy Corporation of India || Company says will take appropriate legal steps to challenge unwarranted action of SECI
- Aurionpro Solutions: Company secures landmark contract for Chennai Metro Phase II automated fare collection system
- Shakti Pumps (India): Company has received the work order from Haryana Renewable Energy Department (HAREDA) for 3,174 pumps || Order worth 1.16B rupees
- Cyient DLM: Company wins long term deal with Honeywell Aerospace Technologies to provide aircraft cooling technology
- Sterling Tools: Company partners with Chinaโs GLVAC to manufacture advance high voltage DC contactors and relays in India for electric and hybrid vehicles || Eyes rupees 250 Cr revenue by FY30
- Polycab India has received orders for development of a Middle Mile network of Bharat Net on a DBOM Model for package 7 (Bihar) for a total contract value of Rs 1550 crore, besides an earlier order of Rs 4100 crore.
- RVNL has grabbed an order from the East Central Railway for the Design, Supply, Erection, Testing and Commissioning of 2x25 kV feeder line for a contract worth ~Rs 180 crore.
- Wipro has announced a strategic partnership with RELEX Solutions, a provider of unified supply chain and retail planning solutions. This partnership combines Wiproโs deep expertise in the retail and Consumer Packaged Goods (CPG) sectors with RELEXโs AI-based supply chain and retail planning platform.
- BRIGADE: Company signs JDA to develop 1 million square feet residential apartments in west Chennai, project to have a GDV of about Rs 8 billion
TechnoFunda Investing Quote from Legends -
Robert Olstein's quote draws a comparison between switching investment styles based on trends and changing lanes in heavy traffic. Just as moving from lane to lane in traffic often brings more risk without getting you to your destination any faster, frequently altering investment approaches to follow the latest market fads increases the likelihood of poor results without significantly improving returns. Olstein suggests that staying consistent with a well-researched strategy is more effective than constantly reacting to market trends, which can lead to mistakes and increased risk without guaranteeing better outcomes.
๐ Book I'm Reading This Week
Deep Simplicity: Bringing Order to Chaos and Complexity by John Gribbin is a fascinating exploration of how complex systems in nature and society emerge from simple, underlying rules. Gribbin, a renowned science writer, delves into concepts from chaos theory and complexity science to illustrate how order can arise from seemingly random processes. The book provides accessible insights into phenomena such as fractals, evolution, and the structure of ecosystems, demonstrating how simple laws can lead to intricate, interconnected outcomes. Gribbin's engaging approach makes complex scientific ideas approachable, appealing to readers interested in the hidden order within the chaos of the world around us.
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TechnoFunda 101 - Power Capsules
Learn technical as well as fundamental concept in a simple way
Spotting New Leaders in a Market Correction: William O'Neilโs Playbook
When markets correct or face downturns, itโs natural for investors to focus on defensive plays or wait for stability before re-entering. But for those who understand the power of spotting new market leaders during these corrections, such periods can be fertile ground for finding stocks with strong potential to lead the next market advance. William O'Neil, famed for his CAN SLIM methodology, emphasized that corrections often produce fresh market leaders, companies poised for major gains once the market resumes its upward trend.
Why Look for New Leaders During a Market Correction?
A market correction typically causes a shakeout, where weaker stocks lose steam, and established leaders might also lose their shine. This phase opens the door for a new set of companies with strong fundamentals and accelerating growth potential to take the lead. Recognizing these emerging leaders early allows investors to catch the beginning of a potential strong uptrend.
Corrections, in essence, act as filters: they often reveal companies that are not only resilient but also demonstrate relative strength against the broader downtrend, signaling investor confidence in their long-term growth story.
William O'Neilโs Criteria for Identifying New Leaders
O'Neil suggests a combination of technical and fundamental indicators to identify stocks that have the potential to lead the next rally. Here are some key attributes of these leaders:
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Relative Price Strength (RS) Line Trending Upward:
- Stocks showing relative strength during a market correction, with their RS lines rising, are likely demonstrating resilience and outperforming the broader market. This is a strong indicator that a stock is receiving institutional support despite market weakness.
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Strong Earnings and Revenue Growth:
- O'Neil emphasized the importance of quarterly earnings growth of at least 25%, paired with robust revenue growth. New market leaders typically post exceptional earnings, even when broader economic conditions are challenging.
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High Return on Equity (ROE):
- A high ROE indicates that a company is efficiently using its capital to generate profits. For O'Neil, an ROE of 17% or higher is ideal. During corrections, companies with strong ROEs stand out as fundamentally strong.
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Accumulation by Institutions:
- Institutional buying during market downturns signals confidence in a stockโs long-term prospects. Watching for price support and trading volume increases in certain stocks can reveal where โsmart moneyโ is flowing.
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New Products, Services, or Market Conditions:
- Many new leaders have unique growth catalysts, such as innovative products or services that distinguish them from the competition. For example, a tech company with a revolutionary product, or a healthcare firm developing a groundbreaking treatment, may be primed for leadership.
Signs That Confirm a New Leader Post-Correction
After the market correction concludes, new leaders often exhibit these traits:
- Early Price Breakouts: Look for stocks that break out from strong price bases with high volume, signaling increased buying interest.
- Continued Earnings Momentum: The new leaders maintain or even accelerate their earnings growth, reaffirming their fundamental strength.
- Sector Leadership: Often, the new leaders are part of sectors that become favored by the market. If tech had previously led but now energy stocks are showing strength, the leaders in that sector are likely to gain sustained traction.
Conclusion: Why Recognizing New Leaders Matters for Investors
Corrections can be unsettling, but they are also moments of opportunity. William O'Neilโs strategy reminds us that the seeds of new market leaders are often sown during market corrections. By focusing on relative strength, earnings growth, and institutional support, investors can identify stocks with the potential to drive the next bull phase.
๐๏ธ My Weekly Podcast For You
Keep Compounding...
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Vivek Mashrani, CFA
Founder, TechnoFunda Investing
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