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Indians believe in auspicious timing—”muhurat”, which drives investors to purchase stock during this time. This often leads to a herd mentality reflected in the Gujarati phrase “Su leva nu muhurat ma?” which translates to “Which stock to buy during Diwali Muhurat?”
Rather than a herd mentality, one can prefer a methodical approach to identifying potential investment opportunities using the concept of delivery volumes. Understanding the delivery volumes of stocks, particularly within specific sectors, can provide valuable insights into investor behaviour and market trends. Tools like the ‘sector volume scanner’ from Definedge, can help analyse various sectors and uncover promising stocks for the festive season.
The importance of delivery volumes
Delivery volumes represent the quantity of shares bought and sold that are settled on the stock exchange. A high delivery volume indicates a strong conviction among investors about a stock, suggesting accumulation rather than mere speculative trading. Analysts often focus on delivery volumes at the stock level, but examining sector-wide delivery volumes can yield even greater insights.
With the limited number of sectoral indices provided by the National Stock Exchange (NSE), Definedge has innovated by creating 64 equal weighted sectoral indices. This allows for a more nuanced analysis of sector performance.
A recent quarterly analysis of these sectoral indices, focusing on the third quarter of 2024, identified sectors that exhibited delivery volumes surpassing their historical averages.
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Data as of theclosing of September 2024
The top sectors emerging from this analysis are Digital India, telecommunications, batteries, defence, and metals—non-ferrous.
Given the significant accumulation in these sectors, it stands to reason that a bullish trend may persist.
Using a top-down approach, here are three stocks from these sectors that warrant attention this Diwali.
Also Read: Three under-the-radar microcaps that you can start tracking right away
1. Bharti Airtel Ltd
Bharti Airtel Ltd is a prominent telecommunications and digital India player. Founded in 1995, the company has grown exponentially, offering various services, including mobile and fixed-line telephony, broadband, and digital television. With a robust infrastructure and a commitment to innovation, Bharti Airtel has been at the forefront of expanding connectivity across urban and rural India.
Bharti Airtel Weekly Chart
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Source: Tradepoint, Definedge Securities
The stock recently broke out of a multi-year consolidation phase post-pandemic, signalling renewed investor interest. An examination of the weekly chart reveals substantial accumulation during Q4 2020 and Q1 2021, propelling the stock from ₹600 to over ₹1,700.
This bullish momentum is further supported by the 50-week exponential moving average (50WEMA) channel, which has acted as a strong support level throughout the rally. As the stock approaches this channel again, it presents a compelling opportunity for the readers to capitalise on potential price dip.
For more such analysis, read Profit Pulse.
2. Amaraja Energy & Mobility
Amaraja Energy & Mobility (ARE&M) has captured attention with its impressive performance in the rapidly evolving energy and mobility sector. As the world shifts towards greener energy solutions, Amaraja Energy & Mobility stands ready to drive this transformation forward.
ARE&M Monthly Chart
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Source: Tradepoint, Definedge Securities
The stock has recently surpassed its previous high from 2015, accompanied by the highest monthly volumes recorded.
This surge in volume is critical as it signifies strong investor conviction behind the stock. Despite market fluctuations, the sustained trading above this breakout level indicates robust strength.
As the demand for energy solutions continues to rise, ARE&M could be a pivotal player in the energy and battery sectors, making it a worthy addition to your Diwali watchlist.
Also read: These three stocks doubled dividends in five years. Could they do it again?
3. Hindustan Zinc Ltd
Hindustan Zinc Ltd. offers a compelling investment narrative for those interested in the metals and commodities sector. The ongoing price rally in silver and zincaligns favourably with the company’s growth prospects.
Hind Zinc Monthly Chart
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Source: Tradepoint, Definedge Securities
Historical data reveals that the stock has experienced a significant accumulation phase since 2008, with a breakout occurring in 2016. Following this, a re-accumulation period took place between 2018 and 2023, positioning the stock within the markup phase—a bullish stage in the Wyckoff theory of market behaviour.
The recent price dip provides a potential strategic entry point for readers seeking to benefit from the ongoing commodities rally, making it a prime candidate for tracking this Diwali.
To conclude, as we approach Diwali, adopting a more analytical approach to stock selection is essential, moving beyond the herd mentality often observed during this festival season. Readers can identify promising opportunities rooted in genuine market trends by focusing on delivery volumes, both at the stock and sectoral levels.
Also Read: Up 900% in three years, will Diwali hoist this jewellery stock to new heights?
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Definedge may or may not own thesesecurities.
Brijesh Bhatia has over 18 years of experience in India’s financial markets as a trader and technical analyst. He has worked with the likes of UTI, Asit C Mehta, and Edelweiss Securities. Presently he is an analyst at Definedge.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However clients of Definedge may or may not own thesesecurities.
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