The markets are doing something extraordinary—they’re defying gravity and breaking narratives.

For a long time, the belief has been that if the US markets fall, Indian markets must follow. But the last 7–8 sessions have surprised everyone. The Indian markets have shown a sharp recovery, with the Nifty even crossing its 200-Day Moving Average (DMA)—a key technical indicator that often signals the start of a bullish trend.

Is This a Bear Market Rally or the Start of a New Bull Phase?

Whether this is just about of short covering or the beginning of a structural uptrend will become clearer over the next few weeks. Holding above the 200 DMA will be crucial in confirming the trend. Sentiment is beginning to shift. Just days ago, people were talking about levels like 19,000 or 20,000. Today, the talk of 24,000+ is back on the table.

This optimism is being supported by macroeconomic narratives such as positive India-US trade discussions. But the real kicker could be the falling US Dollar Index. Funds exiting US dollar assets aren’t flowing into Treasuries but are being redirected to other asset classes—including Indian equities.

We’ll watch FII numbers to confirm if this is indeed the case.

Where is the market headed?

Market Overview

Up 1.15% today, with a gain of almost 2,500 points in just eight sessions.

Nifty Next 50

Up 1.79%, reclaiming January highs.

Nifty Mid and Small Cap

Mid Caps: Up 2.2%, nearing November lows.

Small Caps: Up 1.9%, showing broad market strength.

Bank Nifty

Up 1.8%, hitting a new all-time high, soaring from 47,000 to 55,000 in a month—a staggering 15–17% gain.

GOLD

Meanwhile, Gold continues to shine, up 1.78%, now hovering around ₹98,500, signaling deeper macro shifts—possibly a global reallocation from US Treasuries to alternative safe havens like Swiss Francs, Euros, and Gold.

Advance Decline Ratio

Today’s market breadth was impressive, with 422 advances vs 78 declines.

Heat Maps

The heatmap was largely green, with strong performance from banking, auto, IT, and power sectors. In the Nifty Next 50, stocks like CG Power, Divi’s Labs, Adani Enterprises, Lodha, and Chola Finance led the gains.

Sectoral Overview

Among sectoral performances:

• Capital Markets: +4.6%
• Energy: +2.5%
• PSU Banks: +2.5%
• Real Estate: +2.3%

Sectors of the Day

Nifty Capital Markets Index

This rally was led by names like BSE, KFin Technologies, Nippon AMC, HDFC AMC, and CDSL, showcasing renewed investor confidence in capital markets.

Story of the Day : Is Market Cap Bias Destroying Your Portfolio?

Let’s now dive into the key issue of the day: Market cap bias and how it may be skewing your portfolio performance.

The CNX 500 Illusion
The CNX 500 index seems well-diversified on the surface—after all, it covers 500 stocks across market caps. However, actual weightage tells a different story:

Top 5 stocks (just 1% of the index) account for 17% of its weight

Top 10 = 25% of weight

Top 50 = 53% of weight

Top 100 = 69% of weight

That means the bottom 400 stocks only account for 31% of the index. The supposed diversification is, in reality, a heavy tilt toward large caps, which make up 70% of the index, with mid caps at 20% and small caps only 10%.

Performance vs Weight: A Hidden Disconnect
Consider this: The top 5 performing stocks in CNX 500 delivered an average return of 235% over the past year—but they had just 0.5% index weight. So, even stellar performance had minimal impact on the overall index return.

Year-to-date, the CNX 500 is down 1.3%

Last 12 months return: 7.45%

Yet,

Top 25 performers had an average return of 129%, but a combined weight of only 2.4%

Top 5 year-to-date performers delivered 48% average return, but accounted for just 0.7% weight

This mismatch means that even if some stocks fly, unless they’re heavily weighted, they won’t lift the index—or your portfolio—much.

The Illusion of Diversification
Owning the CNX 500 gives the illusion of being spread across market caps, but in reality, you’re almost entirely exposed to large caps. And when mid or small caps rally, the index doesn’t reflect that movement significantly.

So why does this matter?

Because strength is not always in size. A small-cap or mid-cap stock can vastly outperform, but without proper weight, it doesn’t move the needle. Index investing often rewards size over strength, which is why a passive strategy based solely on market cap might fail to generate alpha.

A Smarter Approach: Momentum & Equal Weighting
What if, instead of relying on market cap weights, you focused on momentum and strength, giving equal weight to stocks showing outperformance?

This approach helps you:

Avoid overexposure to underperforming large caps

Capture the upside from lesser-known but strong performers

Allocate more intelligently across sectors and market caps

In other words, chase performance, not size.

As the analogy goes: Betting on the tallest kid to win the race ignores speed and strength. Similarly, allocating your capital based on size alone can be misleading.

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