Aniket Pujari
With a daunting bear market forcing us to reconsider the trends, investors now have a unique opportunity to thrive even in challenging times. Currently, we should identify stocks that exhibit specific price trends and lack consistent performance. Investors can capitalise on short-term gains in this market by identifying these companies.
In this article, we delve into the strategies for identifying momentum stocks during a bear market, exploring how to leverage their potential to achieve financial resilience.
Whether you’re a seasoned trader or a cautious investor, momentum stocks could be your key to success. Trading in such a scenario would ask us to be more open to engaging on the short side of the market, which is not a natural instinct for many traders. However, this is the need of the hour.
Let us look at some weak sectors across the market from where we can select some tradeable candidates for the upcoming sessions.
Also Read: Investing 101: How to identify a fraud company
Information technology
India’s IT sector is set to achieve remarkable growth in 2025, with IT exports projected to reach $210 billion, accounting for 18% of global IT outsourcing spending. Overall IT spending is expected to rise by 11.2%, touching nearly $160 billion, while job opportunities in the sector could expand by 15-20% across industries.
Despite India’s IT sector’s promising growth, global tech markets are facing significant turmoil. The Nasdaq has plunged 4%, marking its steepest drop since 2022, erasing $750 billion in market value from major US tech companies such as Apple and Nvidia. This downturn, spurred by mounting fears of a U.S. recession and uncertainties around trade tariffs, has sent shockwaves across markets, including India. Investor anxiety continues to rise as the US bond market signals potential instability, with yields declining amidst looming economic concerns. Fears of higher tariffs and restrictive trade policies dampening US economic growth have driven investors towards safer assets, prompting a retreat from tech-heavy portfolios globally.
Major IT players such as Infosys, Wipro, and Tech Mahindra are grappling with the impact. The weakness, especially in mid-cap IT stocks, continues to be actively tracked and attracts some attention.
Among them Tata Elxsi has been showing continued weakness as the negative triggers that are emanating over the last few days in the IT space combined with the poor Q3FY25 results have accentuated the decline. As the trends continue to remain weak with global hangover stepping in the possibility of continued downward traction is very much on the cards.
From the charts attached below we can consider that the trends are facing stiff resistance when they rally into the MA Bands indicating that the trends are attracting selling pressure at higher levels. The long body bearish candles indicate that the momentum remains pressured to the downside. With the Relative Strength Index continuing to show sustained weakness, the trends are not showing any signs of recovery. Hence , it’s best to look at some selling opportunity in this candidate.
Tata Elxsi: Sell: ₹5,420-5,430; rallies to ₹5,490; stop: ₹5,515; target: ₹5,205
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Also Read: Coforge’s $1.56 bn Sabre deal win sparks fresh optimism in a shaky IT sector
Automobiles
The auto sector encountered significant hurdles in the October-December 2024 quarter (Q3FY25) as post-festive demand fell short of market expectations. Seasonal challenges, including increased discounts and a less favourable product mix, weighed on performance. However, stabilizing commodity prices provided a small silver lining.
The BSE Auto Index has been lagging behind the broader indices during the quarter, ending its three-year streak of consistent outperformance. In the two-wheeler segment, wholesale volumes showed little change year-on-year, and adjustments in the product mix led to an estimated sequential price drop of up to 1.5%. Margins also faced pressure, with a projected sequential contraction of 50 basis points, signalling profitability concerns for the segment.
In this scenario, Ashok Leyland stock has been showing considerable weakness. Its inability to revive from lower levels has spelled more pain in the stocks and the sharp decline seen yesterday clearly spells out more pain ahead. Despite a decent Q3, beating estimates, prices have not shown enough strength.
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Ashok Leyland’s share price has declined due to multiple challenges. The road freight market is facing oversupply following rapid growth from 2022 to 2024, while October 2024 sales dropped 9% year-on-year. The broader economic slowdown has also impacted the auto sector, contributing to market decline. Margin pressures have also intensified with the rising risk of discounts, further weighing on the company’s performance.
This has started reflecting on the prices and can be encashed over the next few days. One can consider going short as the range-bound scenario has given up. An important value support around ₹205 has been broken, triggering more selling interest in this counter.
Ashok Leyland: Sell: ₹200; Rallies to ₹206; Stop: ₹209; Target: ₹191
Fast moving consumer goods (FMCG)
The Nifty FMCG index has experienced a steep decline of over 8.5% year-to-date as of 20 February 2025, marking one of the sector’s longest losing streak. Falling for 14 consecutive sessions, the index has seen a massive ₹2.7 trillion erosion in investor wealth. This downturn follows a short-lived rally sparked by personal income tax reforms in the Union Budget.
Despite initial optimism, the FMCG sector is grappling with weak consumer demand and mounting margin pressures, overshadowing the post-budget enthusiasm. These challenges continue to weigh heavily on FMCG stocks, raising doubts about the sector’s resilience and future prospects.
United Breweries Ltd (UBL) is facing a downturn in its share prices due to several challenges across different fronts. Regulatory hurdles, such as calls for standardized beer pricing in Karnataka by the Brewers Association of India and tariff changes on bourbon, have created significant pressure. Additionally, the company is grappling with intense competition from other major players in India’s brewing industry.
Margin compression is another key issue. UBL’s operating margins have tightened despite steady revenue growth. Production disruptions have further dented profitability, compounding the strain on financial performance. Moreover, UBL’s debt-to-equity ratio surpasses the industry average, signalling higher financial leverage, which adds to investor concerns. These collective factors have contributed to the recent slump in UBL’s stock performance.
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The charts show that the trends have been attempting to revive but have remained unsuccessful. The recent long body candles that are highlighting the weakness continue to curb the bearish sentiment. Now, we are observing that the revival attempts have been slow. The relative strength index (RSI) is seen dipping below 40, highlighting the underlying bearishness. The inability of revival seen on the charts clearly spells some weakness ahead. One can consider this candidate as the weakness in this sector continues to persist.
UBL: Sell: ₹1,878, Rallies to ₹1,910; Stop: ₹1,930; Target: ₹1,805
Raja Venkatraman is co-founder, NeoTrader. His registration number is INH000016223.
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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
