The Next Sector to Buy in Fearful Market

By Brijesh Bhatia (@bbrijesh9)

Pune, 12th January 2025: As 2025 begins, the markets show signs of a bearish trend, with fears gripping investors across D-Street. The Nifty50 has corrected by 2.6%, while the broader market, Nifty500, has seen a more significant drop of 4% in the past week.

Sector rotation becomes an essential tool for traders, but manually tracking the ebb and flow of more than 50 sectors can be overwhelming. To simplify, Definedge provides a game-changing tool – Definedge Momentum and Performance (DeMAP).

Understanding Sector Rotation

Sector rotation is the cyclical movement of capital from one sector to another in response to changing economic conditions. This shift in investor preference is vital to the market’s natural ebb and flow. For example, when the IT sector reaches a peak, funds might flow into more defensive sectors like FMCG (Fast Moving Consumer Goods) or Pharmaceuticals. Such transitions often happen rapidly, making it challenging to keep track of the momentum using traditional methods. Sector rotation acts as a signal for traders to stay ahead of the curve by identifying where the capital is moving next. The challenge lies in tracking momentum across multiple sectors simultaneously. This is where DeMAP comes into play.

The Power of Definedge Momentum and Performance (DeMAP)

DeMAP is an innovative solution developed by Definedge, designed to simplify the analysis of sectors, segments, and stocks in a rapidly changing market. Integrating a wide range of technical analysis indicators, DeMAP allows traders to assess market momentum and performance with more incredible speed and accuracy.

DeMAP brings together several widely-used technical analysis tools, including:

• Price Analysis: Observing price trends and patterns.
• Momentum Indicators: Identifying the rate of change in a security’s price.
• Trend Following Indicators: Tracking whether a security is trending upwards or downwards.
• Range-Bound Oscillators: Detecting when an asset is in a range and when it might break out.
• Relative Strength Analysis (RSI): Measuring the speed and change of price movements.
• Breadth Analysis: Assessing the number of stocks advancing versus those declining in an index.
• Candlestick Patterns: Identifying reversal and continuation patterns in price action.
• Point & Figure Charts, Renko, and Line-Break Charts: Visualizing price movements and market trends in alternative chart formats.

This data is aggregated into a single comprehensive metric, giving traders a holistic view of the market’s current dynamics. This allows for quick identification of the most promising sectors and stocks, making it easier to spot opportunities while avoiding the complexities of traditional analysis. 

Dynamic View: Precision in Tracking Trends

One of DeMAP’s standout features is its dynamic view, which allows traders to track momentum over the last 10 sessions. This feature is vital for identifying stocks and sectors that are picking up momentum in the near term, providing traders with real-time actionable insights.

Traders can take a top-down approach to market analysis, starting from the overall sector performance and drilling down to individual stocks within that sector. This helps to identify outperforming stocks in bullish sectors and underperforming stocks in bearish sectors, enabling a more refined trading strategy. 

What’s Next for 2025?

As we move into the new year, market conditions are still largely bearish, with most sectors in the Water zone. The broader market continues to face downward pressure, and many sectors are yet to show signs of recovery. However, a silver lining is emerging in the IT sector.

Source: RZone, Definedge Securities

Despite the broader market slump, the Nifty IT index has recently gained 2%, and the slope of the DeMAP chart has started to turn upward, indicating that the sector may be gearing up for a bullish phase. This shift in momentum makes the IT sector one of the sectors to watch closely in the coming weeks.

Based on DeMAP’s analysis, traders should monitor the IT sector for potential opportunities, especially if the upward momentum continues in the short term. Additionally, while many sectors are still in the Water, momentum shifts could indicate the beginning of sector rotation, offering new opportunities for traders to capitalise on emerging trends.

At the start of 2025, while much of the market remains in a consolidation or bearish phase, the emerging strength of the IT sector provides a glimpse of opportunity. Traders who stay proactive, monitoring shifts in momentum using DeMAP, can position themselves for success even in uncertain times.

Disclaimer: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. 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 these securities.

(About Author: Brijesh Bhatia has over 18 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face in the business channel as a Market Expert and has worked with broking giants like UTI, Asit C Mehta, and Edelweiss Securities. He is currently a Senior Research Analyst and Editor at Definedge.)