Where is the market headed?
The 12th of December brought a better day for the market, perhaps one of the best this week. The market reacted positively to renewed rumors of a US-India deal, with some reports in the papers suggesting negotiations are underway.
Furthermore, the implications of the Federal Reserve’s recent rate cut are gradually setting in, particularly the news that the Fed plans to increase the size of its balance sheet by $40 billion per month. In essence, quantitative easing (QE) is back, which explains why precious metals, especially gold and silver, are soaring.
The equity markets also showed signs of stabilization today.
Analyzing the rupee gold chart, new highs have been crossed on the gold price, now standing at 13,280 per gram (see the image below). The price of gold in INR is receiving two tailwinds: both the USD INR is rising (rupee weakening) and dollar gold prices are also increasing. This provides strong support for the INR gold price. The chart shows that the price has beautifully taken support on its moving average, signaling that this rally in gold is not yet over. Any rally that consolidates for some time should not be mistaken as being finished.
Market Overview
Regarding the market’s direction, indices appear to be in fine form once again. The Nifty has crossed the 26,000 mark. The 26,000 level has been crossed 17 times in the last 35 or 36 days, averaging a crossing every two or three days, though the market has yet to cement its position above it. Nevertheless, the current setup is good, closing above the two-day high, which is considered the minimum benchmark for a short-term upward move.
Nifty Next 50
Nifty Junior also looks better, up 0.84%. While not completely out of the woods, this is a very good pullback considering the sharp losses experienced in the previous two sessions.
Nifty Mid and Small Cap
Mid caps showed an impressive pullback, rising 1.18%, which is perhaps one of the more encouraging charts among the three major indices. Small caps were up 0.83%. Although less impressive than the mid caps and large caps, as it remains further down from its recent peak, it is a commendable attempt at pulling back up.
Bank Nifty
Nifty Bank was up a more modest 0.3%, appearing benign and stable over the last few sessions.
GOLD
As mentioned, gold is up 1.1%.
SILVER
Silver has been rocketing and is now at 1,97,000 rupees per kilo. With GST and making charges, even purchasing a coin or a bar places the price well above 2 lakh rupees. Less than two years ago, silver was around 60,000, and the fact that it is now at 2 lakhs illustrates the rapid expansion of the base money.
USDINR
The USD INR is also making a new high, reaching 90.56, with a closing price of 90.40. This upward trend in the currency does not seem to be stopping for now. The theories suggesting the rupee would appreciate to 40 or 60 based on India’s status as the fastest-growing economy have been laid to rest. While India is growing quickly, money is also being distributed very fast, and fiscal indiscipline, if it can be called that, is attributed as the cause of this rupee crisis.
Advance Decline Ratio
The advance-decline trend was flat, with 354 advances to 146 declines, showing no fault in this chart for the day.
Heat Maps
The heatmap was quite green, with Bharti Airtel, L&T, Maruti, Titan, TCS, Zomato, Nestle, NTPC, the Bajaj Twins, and Axis Bank all contributing to the gains in Nifty.
The Nifty Next 50 also saw very good gains in Adani Power, Hindustan Zinc (up 7% on the back of silver moves), Vedanta (up 2.75%), Ambuja Cement, and BPCL, which rose nicely. Naukri was up 2.5%. All these stocks performed reasonably well in the Nifty Next 50 segment.
Mover Of The Day
Hindustan Zinc took the pole position in the Mover of the Day segment, hitting a 52-week high and zooming 14% in just four days. This sharp movement is a result of the extraordinarily rapid increase in silver price.
Sectoral Overview
In the sectoral trends, Nifty Metals saw a huge run of 2.6% in one day. Over the last week, metals performed the best, up 1.9%, while India Defense was the worst, though it was flat today. Clearly, Nifty Metals has shown leadership over the last few days. Nifty Commodities has also done well, up 1.1% in the last week. Real Estate bounced back 1.5%, and Tourism and Capital Markets performed well, up 1.2%. The Capital Markets sector shows good recovery, moving from what was recently minus 3% to minus half a percent over the last week. Decent gains are coming through in several of these sectors.
Sector of the Day
Nifty Metal Index
Metal stocks exhibit a clear breakout, with Hindustan Zinc, Copper, National Aluminium, Hindalco, and Tata Steel leading the rally.
U.S. Market
In the US Markets during the previous session, the Dow Jones index saw good gains of 1.3%, and the Russell index was up 1.2%, though the S&P and NASDAQ were completely flat.
Some of the moving stocks were Visa, up 6%, and MasterCard, up 4.5%. A look at the long-term charts of Visa and MasterCard reveals them to be nearly straight lines moving up for decades, consistently defying alternatives. MetLife, Nike, and Linde were also major gainers. A reminder is included that some of these stocks could be part of a US stock strategy, but this is not a recommendation.
Tweet Of The Day
Another point of note from the day’s insights concerned silver. Silver has now crossed the 2 lakh rupee mark. Including GST calculations and any premium to the manufacturer, the price for any retail product is well above 2 lakh rupees per kg. It is an amazing run, as the price has almost doubled since July, when it was around 1 lakh to 1 lakh 10,000. On the dollar chart, silver has not had a significant run since the 1980 top of around $50.
Currently, silver is at $65. This means that from peak to peak, the commodity has essentially done nothing in dollar terms for 45 years, leading some to speculate it could eventually reach hundreds of dollars. Whether this happens in two years or ten years is uncertain, but the current rally appears very strong. It is often observed that when a very strong rally begins in any commodity, asset class, or sector, people hold back from participating, which effectively removes all resistance and creates a clear path for the asset to continue its ascent.
