Where is the market headed?
We’ve seen a sudden and dramatic movement in the USD/INR, with the rupee falling and nearing 90. Market rumors suggest the RBI may have eased its buying and is allowing the rupee to settle lower.
🌍 Global Flux and Market Tremors
The last 24 to 48 hours have been marked by significant flux in global markets. One major factor is the tech meltdown following Nvidia’s results. The other is the issue of Japanese yields going through the roof. Japan’s planned large stimulus is causing tremors globally because of the carry trade—where people borrow cheaply in Japanese yen and invest overseas for better yield. If the interest rates or yields within the Japanese economy start to rise, a large portion of this carry trade will need to reverse, causing pressure across asset classes.
In India, the India VIX is sharply up, and the rupee has crashed. Fortunately, the stock market has remained reasonably stable for the day, even though we are at the end of the week.
Market Overview
The Nifty saw a mild drop of 0.47%. We were hoping for a new high yesterday and missed it by a couple of hundred points, so the move is not yet over. We may see a down-leg if the Nifty drops below 25,750, but until then, the hope for the continuation of the uptrend remains.
Nifty Next 50
However, the picture is much clearer in the broader market, which is clearly unwilling to go higher and seems happy to go lower. Nifty Junior was down 1.29%, Midcaps were down 1.14%, and Small caps fell by 1.24%. The small-cap index has dropped to a precarious level that, if broken, could lead to significant downsides.
Nifty Mid and Small Cap
Bank Nifty
The Bank Nifty is also down 0.81% but is still within its uptrend mode. This shows a clear divergence: certain parts of the large-cap space, particularly some Nifty and Nifty Bank components, are displaying very different characteristics than the rest of the market, which is not looking so great.
India Vix
The India VIX is dramatically up by 12% today. This, along with the movement in USD/INR, demonstrates the Bhaav Bhagwan Che (BBC) principle, which states that price moves ahead of the news.
GOLD
Gold is tentative, up 0.22%, while Silver is sharply down 2.21%, showing mixed signals between the two precious metals.
SILVER
Bitcoin
The Bitcoin and the entire crypto world are truly unraveling, with Bitcoin down 5.17% today, having lost approximately 34% in less than six weeks. A significant amount of derivatives, including 2x, 4x, and 5x leveraged Bitcoin ETFs and bets, were built on this asset. These leveraged positions, which many people bought blindly, are now getting crushed completely.
While regular markets are not directly tied to Bitcoin, a domino effect can start when fear from one market rubs off on others. As Bitcoin collapses, significant losses will be incurred globally, potentially leading those affected to become more conservative and book profits in their other assets, thus starting a wave of selling across different markets.
USD/INR
The USD/INR has suddenly popped up, with the rupee crashing to 89.56 as of 4 PM on Friday. The RBI had been controlling the exchange rate to some extent, but it appears they have allowed the INR to fall, likely to keep it in check with other falling Asian currencies.
Advance Decline Ratio
The Advanced Decline Trends were very poor, with only 70 stocks advancing against 430 declines. One would need a microscope to find any stock gaining in the markets.
Heat Maps
The Nifty Heat Map was overwhelmingly red, with only a few stocks like Indigo, Asian Paints, Maruti, Mahindra & Mahindra, and ITC showing minimal gains. Significant losses were seen in IT, banking and finance, steel, metal, infrastructure, and defense stocks.
The Nifty Next 50 was a completely red picture, with virtually no green visible, and stocks that were previously holding up well, such as Hindustan Zinc, HAL, and Vedanta, also took a beating.
Mover Of The Day
The Mover of the Day was Karnataka Bank, which moved up almost 8%. Its strong performance, combined with the fact that it hadn’t hit new highs while the overall bank index had, made this a notable positive move.
Sectoral Overview
Sectoral Trends saw all sectors down except Nifty FMCG and consumption stocks, which typically act as a defensive move when markets are under pressure. Losses were substantial: Metals fell 2.3%, India Defense stocks dropped 2%, and PSU Banks were down 1.4%. .
Sector of the Day
Nifty Metal Index
The metals sector is now giving up some of its recent gains, with Hindustan Copper, Lloyd Metals, Jindal Steel, Hindalco, and Hindustan Zinc primarily leading the fall.
U.S. Market
The US market in the previous session was completely smashed: S&P 500 down 1.5%, NASDAQ down 2%, Russell down 1.7%, and the Dow Jones down 0.8%. This was complete mayhem in the US markets.
Stocks collapsing included AMD, Oracle, Palantir, Intel, and Netflix. The disclaimer notes that some of these stocks might be part of the Weekend Investing U.S. stock strategy and are not recommendations to buy or sell.
Tweet Of The Day
A tweet from Ritesh Jain highlighted the second-derivative problem related to Bitcoin’s collapse. Since about 10-13% of Canadians and Americans own Bitcoin, the dramatic drop in the value of this asset impacts their sense of wealth, or “feel-good factor.” This could percolate into a second-order outcome where consumer spending is impacted, particularly in North America.
The other tweet focused on the Japanese Treasury, specifically the rising yield on both the 10-year and 30-year bonds. As mentioned, everybody and their grandmother has borrowed in yen to deploy funds in the US, India, and crypto. All these carry trades that relied on low Japanese yields will be hit hard over time, potentially forming a contagion wave across the world. The focus should remain on the Japanese yield: if it continues to go up dramatically, all asset classes globally will likely be impacted as people cut positions and withdraw funds borrowed in yen.
