Today, the Nifty tried to clear 25,000 again but failed, continuing the “nervous nineties” phase. Due to some technical difficulties, today’s session faced interruptions, but significant news emerged regarding a GST evasion issue involving influencers, with an amount as high as 30-35,000 crores. This development is likely to affect market performance, making the 25,000 mark elusive tomorrow as well.
Overall, the market was stable with no major corrections in any segment, yet it couldn’t push higher. Another significant piece of news is the rumored discontinuation of Sovereign Gold Bonds (SGBs). We’ll delve into the costs and implications of this towards the end of the discussion.
Market Overview
Starting with the Nifty, it stayed slightly higher than yesterday, gaining 0.38%. The elusive 25,000 figure remains in play, and it’s only a matter of time before it breaks through.
Nifty Next 50
Nifty Junior also performed well, up 0.77% to a new high of 74,788, approaching the 75,000 mark, which may act as resistance.
Nifty Mid and Small Cap
Mid-caps rose by 0.5% to 21,860, while small caps, despite making a new high, ended 0.2% lower, which is not concerning.
Nifty Bank Overview
Bank Nifty lagged slightly, up just 0.1%. Recent sessions have seen limited movement, with today’s gain within a couple of hundred points despite more significant intraday fluctuations. A new proposal limiting weekly expiries to one per exchange might impact Bank Nifty trading significantly, affecting many traders reliant on frequent F&O opportunities.
Nifty Heatmap
Today’s heat map highlights gains in life insurance companies, with SBI Life and HDFC Life performing well. Transport Minister Nitin Gadkari is advocating for removing GST on insurance companies. Maruti rose 1.88% ahead of monthly results, while JSW Steel increased by 2.9%. NTPC continued its strong performance for the second consecutive day. Reliance fell by 0.5%, and HDFC Bank was virtually flat.
In the Nifty Next 50, SRF, Bank of Baroda, Zydus Lifesciences, and Siemens were among the top performers. PSU banks and PSEs took a back seat, while Indraprastha Gas Ltd. (IGL) rose 0.71% despite poor results.
Sectoral Overview
Sector-wise, metals, pharma, and consumption stocks showed strength, with metals still below their election-day highs, indicating room for further gains.
Sectors of the Day
Nifty METAL Index
Stocks of the Day
Torrent Power
In the spotlight is Torrent Power, which surged by 16.5%, breaking out of a months-long consolidation phase. This strong pattern has garnered attention, with targets nearly met in a single day. Historically, Torrent Power struggled for years before breaking out above Rs. 285, and since then, it has climbed impressively to Rs. 1,866.
Story of the Day : SGB
Now, let’s discuss the Sovereign Gold Bonds (SGBs) situation. Since their introduction in 2015-16 due to forex issues and high gold imports, SGBs have provided a way for investors to benefit from gold price appreciation with added interest. However, the government’s cost of issuing these bonds has proven high.
So far, around 147 tons of gold have been issued through SGBs, amounting to Rs. 72,000 crores. At today’s gold prices, the government’s liability stands at approximately Rs. 97,000 crores, indicating a 10.5% cost without considering the 2.5-2.75% annual interest paid to bondholders. Including interest, the total cost exceeds 13%, significantly higher than the typical 5.5-6% for government bonds.
This situation arose because the government didn’t purchase equivalent gold to back these bonds, essentially playing a risky game. Now, with gold prices potentially rising further, the government’s liability increases, and they may seek to discontinue SGBs to mitigate this risk. This decision could affect investor confidence, given the discrepancy between initial promises and eventual outcomes.
Your thoughts on the SGB issue are welcome. Despite the potential discontinuation, SGBs have provided decent returns due to gold price appreciation. However, this scenario underscores the need for careful consideration in government-issued financial instruments to maintain trust and stability in the market.
