Where is the market headed?
The financial narrative is currently dominated by precious metals, which are on fire. Both gold and silver have reached new all-time highs in rupee terms, and they are very near their all-time highs even in dollar terms. The exchange rate for the USD INR continues its ascent, hovering around 90.67 to 90.72.
Despite this, stock markets, after opening soft this morning, managed to recover most of the lost ground by the end of the day. Essentially, there was little action in the stock markets while the rally in precious metals continued unabated. A significant point of discussion is the purported export of 600 tons of silver directly from China to India, bypassing the London Bullion Market Association (LBMA). This, along with other data, strongly suggests that India’s demand for silver has exploded.
The chart of the USD INR is revealing, showing a rapid upward pace since late October. Having been near 83 at that time, the exchange rate is now above 90, representing a loss of almost 10% in just under two months. This is considered a worrying rate of depreciation, and the lack of intervention suggests the Reserve Bank’s message is clear: to let the rupee fall. The underlying belief may be that a weaker rupee will enhance exports and mitigate the impact of certain tariffs. However, this depreciation is simultaneously expected to drive up the cost of energy and gold imports.
What is compounding the situation is that the dollar price of gold is also rising. The world is increasingly recognizing that the US dollar is not the strong currency it once was, burdened by a 130% debt-to-GDP ratio. Historically, whenever a leading reserve currency country’s debt-to-GDP ratio crosses a certain threshold, it signals the end of that regime, although no one can predict if this transition will take five, ten, or twenty years. A new monetary world order is inevitable, although its form remains unknown.
Paradoxically, gold is rising because of the negative narrative surrounding the US dollar, while the US dollar is rising against the INR because of a similar negative narrative about the Indian rupee. The end result is that gold, in INR terms, is soaring. The estimated 30,000 tons of gold held by Indian citizens and assets are certainly making them wealthier. This underscores a crucial message: the most practical investors are those who understand that currency cannot be relied upon entirely. For those without any allocation to precious metals, it is advised to consult a financial advisor and begin building a decent allocation over the next few years.
Market Overview
In terms of market direction, indices recovered from their morning lows to close very near yesterday’s levels, registering a minor loss of only minus 0.08%. The Nifty remains within a stone’s throw of new highs.
Nifty Next 50
The Nifty Junior chart gained 0.16%, marking the third consecutive day of gains.
Nifty Mid and Small Cap
Mid caps were also very flat, down minus 0.07%, quickly recovering their morning losses. Small caps gained 0.36%, marking the first time they have recorded gains three days in a row since September. This is seen as a positive sign that the current phase of weakness may be concluding.
Bank Nifty
Nifty Bank was also up 0.12%, having recovered from its morning lows.
GOLD
Gold is up 1.18%, now priced at 13,423 per gram or 1,34,230 per 10 gm.. It has clearly broken out of the previous high set in October and looks set to go higher.
SILVER
Silver is showing even more dramatic moves, surging 3.2% in a single day, effectively nullifying the sharp move observed on Friday. The price is now 1,97,000 per kg, and the landed price for retail purchases, including GST, is estimated to be around 2,05,000 or similar figures, a significant climb from approximately 60,000 not long ago.
Advance Decline Ratio
A positive sign for the day was the intraday strength, where the number of advances continuously increased while declines decreased. By the close of the day, the market was nearly even, with 260 advances to 240 declines.
Heat Maps
The Nifty heatmap looked decent, with gains in Hindustan Unilever, IndiGo, Trent, Shriram Finance, TCS, Infosys, and HCL Tech. Some banking, auto, and energy stocks were down, but the overall picture was reasonably decent.
The Nifty Next 50 saw good runs in commodity stocks and cement, with some FMCG and PSU banks also moving up. Rumors about foreign holding limits in PSU banking are back on the agenda, with expectations that clarification might come only in the budget.
Mover Of The Day
In the Mover of the Day segment, WPIL Limited was up 8.2% after securing an order worth 1,300 crores.
Sectoral Overview
Sectoral trends were evenly distributed. Capital Markets saw losses of 1.29%, Autos 0.9%, and Pharma 0.39%. On the gaining side were FMCG, Media, and PSU Banks. The Media sector’s gains were largely driven by a new blockbuster movie, which is expected to immensely benefit several companies, particularly multiplex operators within the segment.
Sector of the Day
Nifty Media Index
PVR was up 3.46%, DB Corp 6.3%, Prime Focus 5%, and Saregama and Sun TV Network all contributed to pushing the Media sector up.
U.S. Market
The US markets all closed down on Friday: S&P 500 down 1%, NASDAQ down 1.69%, and Russell down 1.5%. A 1% to 1.5% drop in the US market is significant, given that it accounts for 60% to 70% of the world’s market capitalization.
Specific stocks showing heavy losses included Broadcom, which fell 11.43% after being a spectacular multi-fold performer in the last couple of years, AMD losing 4.8%, Oracle down 4.4%, and both Caterpillar and Intel also declining. Some of these stocks may be part of a US stock strategy, but they are not recommendations.
Tweet Of The Day
A final note of reflection for the day concerned the investment journey, posing a philosophical question: which is better—a slower, properly planned pace to a destination, or a faster, erratic pace that risks getting lost along the way?
For those involved in ad-hoc trading or investing without following a proper process, plan, risk management, position sizing, or consistent method, they fall into the latter category and risk getting lost. The advice is to slow down if necessary, establish a proper investment plan, and give it time, which will lead to a very rewarding long-term investing experience.
