November 2025 Investment Letter

November was a month of narrow leadership and a tricky tape. As breadth deteriorated, exposure was kept concentrated in high-RS, large and liquid names, with entries on pullbacks to the 50-DMA rather than chasing breakouts — and quick rotation out of weakening pockets.

Market Breadth and Selectivity

A narrowing rally. Since mid-October, micro- and small-caps have been hit hard even as headline indices held their ranges. Capital is clustering in roughly 100–200 liquid stocks, and overall breadth has thinned — only about 37% of stocks sit above the 200-DMA.

Range-bound indices, fast reversals underneath. The Nifty 500 has struggled to take out its prior high for about 15 months; beneath the surface, many stocks are reversing quickly — a "tricky" market that rewards discipline over aggression. The stance is to work with relative strength and structure: buy dips in strong sectors and avoid yesterday's winners after vertical moves.

The Liquidity Problem: IPOs and FIIs

A busy primary market has parked cash away from the secondary market, reducing follow-through on breakouts. Domestic flows are strong, but FII inflows remain critical to generating sustained momentum over the next 12–24 months. Flows are also chasing US AI themes, gold and silver, which dilutes incremental appetite for India's smaller caps.

Technical Map: Weak vs Strong

• Bottom 45–60% (avoid): prices below the 50- and 200-DMA with RS lines trending down (lower-highs/lower-lows). If the index corrects, these names can fall two-to-three times as much.
• Middle ~15% (stagnant): flat structures, with price and RS roughly where they were a year ago — low opportunity cost if skipped.
• Top ~10–25% (buy on dips): persistent demand, higher highs in price and rising RS — currently concentrated in banks/finance, defence and metals. These are buy-the-dip-to-50-DMA candidates, not chase-at-highs.

Retail Struggles: Why Highs Don't Feel Like Highs

Indices making highs do not equal broad prosperity. Retail portfolios heavy in small- and micro-caps have lagged because of the ongoing correction there. The 2022–2024 "easy money" mindset does not fit a low-momentum, selective tape — adaptation beats nostalgia.

Strategy and Outlook

Buying strategy now: do not buy fresh breakouts on extended candles; do identify sectors with clear inflows and wait for pullbacks to a rising 50-DMA on constructive volume; and do rotate capital when a sector slips below its short/medium moving averages or RS rolls over.

Small- and micro-caps. The micro-cap correction can persist until a broader global "retest" plays out — for example, if the AI trade unwinds. True bottoms in that segment are a process, not a single print.

Risk management. Avoid weak-RS structures outright — a 10% index dip can mean 20–30% drawdowns in those names. Position sizing, hard stops and sector caps remain non-negotiable.

What Helped, and What Was Avoided

Helped: focus in top-quartile RS names within banks/finance, defence and select metals; entries on 50-DMA pullbacks; and trimming into strength. Avoided: breakout chasing in narrow breadth, micro-cap exposure and IPO-week illiquidity.

Positioning Going Forward

• Core hunting ground: Banks/Finance, Defence and Metals — but only on dips to support with RS confirmation.
• Tactical / avoid: over-extended PSUs and weak-RS pockets; treat metals as swings with tight risk.
• Ballast: keep FMCG and Utilities modest as curve-smoothers during index pauses.
• Catalysts to watch: the FII flow trend, the IPO calendar (a liquidity drain), breadth recovery (≥50% above the 50-DMA) and follow-through days after pullback lows.

Bottom Line

November rewarded selectivity and patience. In a market where breadth is narrow and reversals are swift, the edge comes from RS discipline, buying pullbacks and rotating out of weakening buckets — not from chasing headlines or highs.