Where is the market headed?
The markets right now are looking very, very dull and are correcting. We’ve already lost about 600 points from the recent peak, and there are no immediate triggers in sight. A slight sense of discomfort in the global markets seems to be causing jitters, especially across the AI and semiconductor spaces. We’ve seen Taiwan stocks bleeding quite badly, and Japanese stocks also took a hit over the last few days. It appears there might be some sort of a topping or a pause in the massive AI wave we’ve been witnessing, with people now beginning to question its trajectory.
The founder of OpenAI has even hinted at the need for government intervention in AI funding, and while we don’t know where this is headed, it’s significant because AI companies have been the global market leaders in this last leg. If they begin to crack, it’s bound to have a rub-off effect on the rest of the market as well.
Market Overview
The chart for the Nifty is not looking very promising. As soon as it broke down below a key pivot point, it indicated that the previous upward leg is certainly over, and now we must find a new bottom where we can consolidate before any potential upward move.
Today, the Nifty was down 0.34%. However, the real worry comes from the broader market, where we saw a “waterfall-like event,” similar to what happened in September.
Nifty Next 50
The Nifty Junior saw a massive fall of 1.24%, which is certainly triggering a shorting wave in Nifty Next 50 stocks.
Nifty Mid and Small Cap
Mid caps were also bleeding, down 0.96%, and small caps were hit even harder, down 1.49%. This represents a very sharp cut over the last two sessions. If this pattern forms a “flag”—where we have a pole, followed by a flag formation, and then the pole continues its downward path—we could face a very deep cut, perhaps even heading towards 16,000 or so. This inability of the previous leg to move higher is a major chart concern, but we’ll have to wait and see what happens next.
Bank Nifty
The Bank Nifty is slightly better, down only 0.47%, but it doesn’t look extremely good either. It has spent about 10 or 12 days consolidating in the 57,500 to 58,500 zone without breaking out.
GOLD
Gold is up 0.91%, hitting a value of 12,113 today. As has been observed, whenever Indian equity markets underperform, gold in rupee terms typically starts doing well.
SILVER
Silver is also up 1.4%, with its chart showing good support at a key trend line.
Advance Decline Ratio
The Advanced-Declines ratio was extremely poor, standing at 85 advances to 415 declines, and this heavily lopsided trend towards declines persisted throughout the entire day after the first hour of trading.
Heat Maps
The heat maps were also extremely poor. Heavyweights like Grasim and Hindalco lost 5% and 6%, respectively, while others like L&T, NTPC, BEL, Eicher Motors, Titan, JSW Steel, and Tata Steel also moved down. ICICI Bank and Bajaj Finance lost about 1.5%.
The Nifty Next 50 was awash in red, with sharp cuts in Chola Finance, PFC, PNB REC, Havells, Jindal Steel, Indian Hotels, Zydus Life, and HAL Hyundai. Only a handful of stocks, like Reliance among the big heavyweights, and some gains in TCS, Wipro, and Asian Paints, managed to stay in the green.
The breadth of the selling is very broad-based, and such widespread sell-offs typically take time to cool down, consolidate, and then turn around—they rarely reverse in a single day.
Mover Of The Day
The top mover of the day was Redington, which jumped 15.8% after reporting a record quarter.
Sectoral Overview
Looking at sectoral trends, hardly any sector remained in the green. Only Nifty IT and Nifty Auto bucked the trend, clocking marginal gains of 0.18% and 0.06%, respectively. Media was the worst hit, down 2.5%, followed by Metals at 2%. Defense, Tourism, Public Sector Enterprises (CPSEs), and Real Estate were all down between 1.5% and 2%.
Sector of the Day
Nifty Media Index
The sell-off was significant for the day, with many media stocks like Saregama, Tips, Nazara, Network 18, and Sun TV losing between 2.5% and 5.5%.
U.S. Market
In the previous session, US markets were sticky but not dramatically bad. The S&P 500, Dow Jones, and NASDAQ were down 0.37%, 0.5%, and 0.6%, respectively, while the Russell 2000 actually did well, gaining 1.54%. Over the last month, the Russell is down 0.9%, but the NASDAQ is up 2.43%, suggesting things haven’t gone too badly there yet, despite all the discussions about a fall in semiconductor and AI stocks.
Leading the rally in the US were Amgen (7.8%), Starbucks (4%), Tesla (4%), Qualcomm, and Caterpillar (both around 3.9%). A disclosure: the Weekend Investing US portfolio may hold some of these stocks.
Tweet Of The Day
In the “Tweet of the Day” section, Ritesh Jain highlighted the concept of the Turkish Portfolio. This strategy arises in countries like Turkey, where the local currency continuously debases, causing bonds or cash holdings to lose real value. Citizens, therefore, rush to convert their local currency into US Dollars or other assets as soon as they receive it. In such unstable currency environments, holding a significant amount of gold is key. The “Turkish Portfolio” is typically defined as a 50% stocks and 50% gold allocation. Ritesh suggests this portfolio would also perform well in Japan, France, and Britain, and it’s well-known that it works extremely well in India, a trend I believe will continue to be increasingly effective going forward.
Another tweet, from BullionSmart, focused on gold’s technical setup. Despite gold recently making lower lows, the technicals suggest that as soon as it hits a pivot around 4050, there is an opportunity for a very fast upward move. The whole idea that people saw a recent top and declared gold “done” may be incorrect. There is a strong possibility that gold will make a comeback and could even surpass its previous high. Looking at gold’s journey over the last few months, it seems unlikely that this entire rally would be completely nullified, which would signify the end of the gold rally for many years. That outcome seems improbable because demand remains strong from all corners.
