Where is the market headed?
The headline news comes from Japan, where the central bank has increased interest rates to 0.75 percent. This is the highest level since September 1995 and represents a massive paradigm shift. Japan has operated near zero interest rate levels for decades to fight deflation, but rising costs for fuel and essentials, along with a weakening yen, have forced a rethink of this easy monetary policy. This move signals a major shift away from an ultra-low rate regime and could have significant implications for global markets.
Despite the news from Japan, global markets are seeing a positive trend as 2025 concludes. This optimism is primarily driven by softer inflation data from the United States, which reported a rate of 2.6 percent compared to the 3 percent that was expected.
The currency and commodity markets are also seeing notable activity. The Indian Rupee is gaining strength following a small correction in crude oil prices and corporate dollar inflows. In the commodities space, Silver is a primary point of interest as it heads for an unprecedented eighth consecutive month of gains.
After breaking through resistance near 30 dollars, it has performed exceptionally well, signaling a potential 3x move since the start of 2024. Technical charts show a cup and handle breakout, suggesting that commodities like Gold and Silver may be entering a cycle where they outperform equities in the medium term.
Market Overview
Diving deeper into the indices, the Nifty closed at 0.58 percent higher, managing to stay above the 25,700 to 25,725 support mark. This puts the index within striking distance of new record highs before the year ends.
Nifty Next 50
Nifty Junior rose 0.81 percent and appears to be attempting a trend reversal near the 68,378 level.
Nifty Mid and Small Cap
The Mid Cap index trumped its last three candles with a 1.16 percent gain, though it faces resistance at 22,146. Small caps also provided a much-needed breather with a 1.3 percent rise today. This broad participation is vital for a healthy market, especially since lower market caps have lacked traction recently.
Bank Nifty
Bank Nifty gained 0.27 percent, continuing its steady performance within the financial sector.
GOLD
While Silver saw a minor daily dip of 0.14 percent and Gold lost 1.15 percent today, the long-term outlook remains optimistic given that Gold recently hit a new all-time high.
SILVER
Advance Decline Ratio
The market breadth today was quite strong, with 393 advances against 107 declines, resulting in a nearly 4-to-1 performance ratio.
Heat Maps
Heat maps were predominantly green, with Reliance leading the way with a 1.34 percent gain. Most banks performed well, with the exception of Kotak Bank, while the IT sector remained somewhat dull despite a positive showing from Infosys. Auto stocks like Maruti and the Adani Group counters also showed reasonable gains.
Mover Of The Day
One of the biggest movers was Ola, which rallied nearly 10 percent after promoter Bhavish Agarwal cleared all promoter pledges. However, significant concerns remain regarding the company’s product reliability and service quality, and this single-day rally does not yet confirm a long-term trend reversal.
Sectoral Overview
Sectoral trends showed that the Defense sector was the top performer today with a 2.04 percent gain, followed by Real Estate and Tourism. This broad market participation is a welcome change from the last month, where almost all sectors except IT, Metals, and Auto were in the red.
Sector of the Day
Nifty India Defence Index
Defense, for instance, had lost about 8 percent over the last month before finding support today.
U.S. Market
In the US, the NASDAQ and S&P 500 showed strong gains driven by the positive inflation data, with stocks like Starbucks, Tesla, and Palantir leading the charge. Starbucks notably gained nearly 5 percent, breaking past its 87 dollar resistance level. Some of these stocks may be part of Weekend Investing strategies, but these mentions are strictly for information and are not recommendations.
Tweet Of The Day
The shift in Japan’s policy remains a central theme for global investors. For decades, investors borrowed cheaply in Japan to invest elsewhere, a practice known as the carry trade. As Japanese interest rates rise, this source of cheap money could shrink, and capital may flow back into Japan. This could lead to a stronger yen in 2026, affecting trade flows and global bond yields. Markets typically dislike sudden policy shifts from traditionally conservative players like the Bank of Japan, so increased volatility may be expected as the world adjusts to this normalization cycle.
