Where is the market headed?
It turned out to be a lackluster day, but there was some nice news from the auto sector. The festive season started yesterday and on the very first day, sales numbers looked quite strong. Reports from Maruti, Hyundai and Tata Motors were encouraging, and it seems that consumption is going to be the big theme going forward.
The pent-up demand for white goods and automobiles, along with GST rate rationalization from yesterday, is expected to further support demand for consumption goods. That has become the main positive theme in the market.
On the other hand, the negative theme continued in the IT sector where uncertainty remains. There are still questions about how IT companies will deal with the H1B visa issue.
Market Overview
Looking at the charts, this was the fourth day in a row that Nifty remained in a sulky mood, closing 0.13% lower. The index is not exactly falling sharply though. After the strong run we had, these four days of correction could have been much worse considering the recent news flow. So the fact that the market is holding up despite negative cues is actually positive.
Nifty Next 50
Nifty Junior, however, lost 0.46%.
Nifty Mid and Small Cap
Midcaps were down 0.29% and Smallcaps fell 0.52%. These were mild losses and nothing too worrying.
Bank Nifty
Nifty Bank, in contrast, perked up with a 0.41% gain for the day.
GOLD
Gold continues its relentless bull rally, gaining another 1.5% today. Prices are now at 11,443 per gram, more than double from 5,500 just 18 months ago when gold was at 55,000 per 10 grams. At every stage, people thought gold had run up too much, but it kept proving them wrong. International commentary is even suggesting that gold could touch 5,000, 8,000 or even 10,000 dollars an ounce. The monetary system itself is going through a big change, and it will only be clear in hindsight how deep this change really was.
Advance Decline Ratio
The advance-decline ratio was also weak today with 333 declines and only 267 advances.
Heat Maps
Most of the Nifty heat map was red, led by FMCG. This was surprising because the broader theme had been consumption stocks, yet FMCG fell. UltraTech Cement slipped 2%, Tech Mahindra, HCL Tech, Infosys and TCS also saw mild declines. Life insurance companies continued to bleed as margins are being squeezed after the GST exemption for consumers, which prevents insurers from claiming input credits on their expenses.
On the positive side, Axis Bank, Kotak Bank, SBI and Bajaj Finance had a good day. The banking space seems to be undergoing a churn with private banks losing some ground to PSUs. Power stocks also looked strong, while Reliance remained flat.
In the Nifty Next 50 space, there was profit taking in Adani group stocks which had rallied recently. Godrej Consumer Products fell 3%, Indian Hotels also dropped, along with Naukri. Pidilite, which went into a split or bonus, was in focus. Jindal Steel rose 2.9%, BPCL and Motherson also gained, while capital goods saw mild losses.
Mover Of The Day
The mover of the day was Tata Investment Corporation, which surged 12% after announcing a split of its equity shares. The stock has already climbed from 6,800 to 8,100 recently.
Sectoral Overview
Sector-wise, PSU banks led the rally with a 1% gain, followed by metals and autos which were boosted by good commentary from Hyundai and Maruti. Private banks gained 0.53%, though not as much as PSU banks. On the losing side, FMCG was down 1.29%, real estate fell 0.89%, and tourism, defense, consumption and IT also declined.
Sector of the Day
Nifty FMCG Index
FMCG stocks saw a sharp correction from recent highs with Godrej Consumer, Radico, Britannia, HUL and Nestle leading the fall.
Nifty PSU Bank Index
PSU banks, on the other hand, hit fresh highs with Canara Bank, SBI, Union Bank, Bank of Baroda and Bank of India all gaining.
Tweets Of the Day
In the Tweets of the Day segment, there was an important update for silver fans. Although I’m personally not much of a silver fan, silver too has been performing well. The difference between gold and silver is that gold moves steadily, while silver tends to move in a very lumpy fashion. A chart showed that after a 13-year breakout in 2005, silver delivered a 6x move within 6 years.
Now again, after 13 years, a breakout has happened and we are only 18 months into it. No one knows where this rally could take silver, and that is what Bullion Star highlighted in its tweet.
Another important chart was about the INR-USD exchange rate. The rupee has quietly slipped from 88 to 88.75 in just two days. When I posted the chart it was at 88.40, but by the end of the day it was 88.75. Many had expected the rupee to strengthen as the dollar weakened against other currencies, but the opposite is happening.
The rupee is losing value not only against the dollar but also indirectly against the euro, pound and Swiss franc, making it one of the weakest currencies in the world right now. For Indians planning a European holiday, it means much higher expenses because the rupee is weak against both the dollar and European currencies.
