Where is the market headed?
The big event that everyone is waiting for is the Fed meeting, which starts tonight and ends tomorrow night. The outcome will likely be known early hours on Wednesday. This meeting is the biggest factor in the market right now. If the Fed raises rates by 50 basis points, most emerging markets will probably rally. If they move only 25 basis points, the market has already factored that in. But if they don’t move at all, then markets could go down. So, this is the setup we are in.
Market Overview
Today’s market was completely flat, almost like a deer caught in headlights. Everyone is just waiting for this news to come through. All indices stayed frozen where they were, with no big movement at all. Nifty was down 0.18%. It simply retraced what happened in the previous session post-open, and the move was so weak that it could not even cover the small gap left from Friday’s gap-up. Usually, if the market is weak and a gap is nearby, it goes and fills it. But here we have two gaps, and still, the market showed no interest in filling them.
Nifty Next 50
On the brighter side, Nifty Junior broke out of two important tops and closed above them, which shows strength. It was up 0.6%.
Nifty Mid and Small Cap
Midcaps also gained 0.42% and small caps were up 0.64%. Small caps cleared previous resistance too, and although it would be good to see a few more sessions or even a weekly close above that level, they are looking strong for now.
Bank Nifty
Nifty Bank was not as impressive, closing just 0.14% higher.
GOLD
Gold, on the other hand, has been flat for the last three to four sessions, still hovering near 11,000.
The surprising part about gold’s rally is that it has gone from 9,800 to 11,000 with a strong premium in the market. Local jewelers are reporting a premium of 3,000 to 4,000 rupees over this price. This shows a mad scramble to buy physical gold. Whether this turns into an even bigger rush or simply collapses on itself is hard to say.
In the last 30 years of tracking gold, it is rare to see a situation where prices go up 10% and there is still a premium. Normally when gold rises fast, sellers rush to book profits and buyers step back, which creates a discount. But this time, buyers are still eager to buy even at higher levels, which is quite unusual.
Advance Decline Ratio
Market breadth was absolutely flat today, with advances and declines almost equal at 299 versus 201.
Heat Maps
IT stocks saw mild declines. Infosys, despite its 18,000 crore buyback, could not create excitement. The company seems to be struggling in upgrading itself over the last four to five years, especially in artificial intelligence, and now has no better use of money than to return it to shareholders.
Other major losers included Mahindra and Mahindra, Titan, Eicher Motors, Asian Paints, Cipla, Dr. Reddy’s, and Sun Pharma. Pharma as a sector was down. Bajaj Finance managed a small green tick, but overall there were no big movers in the main index.
The Nifty Next 50 had a very different picture. Siemens, Motherson, ABB, DLF, PFC, Lodha, IRFC, and LIC all did quite well. Some stocks like Bosch, Adani Power, Britannia, and Shree Cement faced losses. But overall, the action seemed more lively in this index compared to the main market, where everything else was frozen waiting for the Fed meeting outcome.
Mover Of The Day
The mover of the day was RailTel. Railway stocks, which had been beaten down badly over the last three months, are now making a comeback. RailTel gained 6.7% after a significant order win of 1,000 crores in early September.
Another notable mover was Idea, which went up 6%. The Supreme Court has scheduled the AGR plea for September 19, and this has now become a “too big to fail” situation. The government eventually becomes a shareholder in this company. The stock has risen from 6 rupees to nearly 8 rupees, making it one of the best performers in the past one month.
Sectoral Overview
Among sectoral trends, the only sector shining today was Nifty Realty, which jumped 2.41%. Real estate as a space is often written off, but it keeps bouncing back. Over the last one year, real estate is still down 14%, but today’s dramatic 2.4% move showed strength. Other sectors were not very consequential. Nifty IT and Nifty Pharma were weak. IT is struggling under continuous pressure from the U.S. on services tariffs, while pharma continues to remain lethargic.
Sector of the Day
Nifty Realty Index
Realty, however, is now at some resistance levels. Companies like Anant Raj, Prestige, Brigade, and DLF all performed well. Anant Raj was up 9.94%, possibly because of a new project announcement, though the details are not clear yet.
Tweets Of the Day
On social media, one interesting tweet came from Redbox Global. It highlighted that nearly half of Nifty 500 stocks are trading above 40 times PE. When compared to global indices, the Nifty 500 looks like one of the most expensive markets. The big question is how such valuations can be sustained in today’s environment. Personally, my thought process on PE is a bit different. Although I am not a practitioner of value investing or fundamental investing, I feel that in today’s world, the absolute value of PE has no real meaning.
Over the last five years, trillions of dollars have been printed and put into circulation. If the money supply was “x” when PE was 10, and now money supply is 4x, then it is natural that equities will reflect that expansion. Even if not 4x, there will at least be a 2x kind of impact on stock prices. So the base of money itself decides where PE will sit, and that base is expanding like never before. That is why I am not surprised to see PEs of 40.
Maybe in five years we will be talking about 80. On an absolute basis, PE as a concept has no meaning for me. The only valid use of PE is in relative comparison—like when two companies in the same sector with similar growth patterns are trading at very different multiples. In such a case, one can say one stock is more expensive than the other. But otherwise, absolute PE is meaningless in my view.
Another important tweet came from Peter Schiff. He pointed out that the Fed could be on the verge of making a major policy mistake. Normally, interest rates should be cut when inflation is coming down. But right now, inflation is still hot, and yields have not cooled despite announcements of cuts. In such a scenario, if the Fed still goes ahead and cuts rates, inflation could skyrocket. This would be a classical policy mistake. Schiff suggests, and I agree, that politics may be guiding economics here. The White House pressure may force the Fed to act regardless of its independent judgment.
