Where is the market headed?
As the calendar year draws to a close, what initially appeared to be a Santa Claus rally seems to be running out of steam. This is a bitter pill to swallow because the markets saw three consecutive green candles on the 18th, 19th, and 22nd, which have now been followed by three consecutive red candles.
The Nifty lost about 0.38% today, and while this is not overly pessimistic, the reality is that the market is still waiting for fresh triggers. There are currently not enough tailwinds to drive strong positive momentum for the Indian markets.
This period is also the end of the calendar year, which is usually met with muted volumes that do not augur well for the markets. Perhaps the next important event or trigger will be the earnings season which is set to kickstart very soon. All eyes are on whether any positive momentum will be created from that counter.
Additionally, the rupee has started to depreciate again in a three-day trend, moving from 89.4 to 89.9. This trend is primarily driven by foreign fund outflows and does not bode well for the economy.
This has absolutely been the year of precious metals. Silver is up an absolute 172%, showing massive performance, while gold itself has gone up about 80%.
At the start of 2025, we can see how these two precious metals stacked up against the equities. The Nifty 50 is up 10%, mid-caps are up 5%, and small-caps are down about 6.4%. This serves as a very important reminder for people who do not give value to asset allocation.
Financial commentator Jason Zweig called gold a pet rock around 2015, and since then, gold has increased four times in value over the last ten years. There are suggestions that gold could do another 4x in the next decade, potentially reaching 18,000 dollars in price by 2035.
This highlights how prone investors are to recency bias. It is easy to write off an asset class like gold or silver during the peaks of equity cycles when you are sitting on good profits.
This has been the best year for gold in nearly half a century, with gains of about 70% in dollar terms and 80% in INR terms. Silver has also had its best year since 1975, showing an exceptional cup and handle breakout in USD terms after a long consolidation. The silver to S&P 500 ratio chart shows how these movements work in ten-year cycles.
Commodities often outperform equities in very long-term cycles, and this seems to be the beginning of a new one.
Market Overview
The Nifty is currently undergoing a correction, trying to come back to the 26,000 level, closing at 26,042 today. After three fantastic up moves, we have seen three consecutive red candles.
Nifty Next 50
The Nifty Next 50 was the only index in positive territory today at 0.01%, though it still formed a red candle and is hovering near its 40-day moving average.
Nifty Mid and Small Cap
The mid-cap index is showing a similar pattern of three green candles followed by three red ones, taking support at its 40-day moving average. Small-caps have been the poorest performers recently, trading well below their all-time highs and their 40-day moving average for a considerable period.
Bank Nifty
Bank Nifty is down 0.29%, currently at 59,011, and appears to be taking support at its 40-day moving average.
GOLD
Gold is up 0.76% and silver is up a massive 3.92%.
SILVER
Advance Decline Ratio
The market started well in the first hour, but the second half was brutal, with 324 declines against 176 advances.
Heat Maps
Nifty’s weakness was primarily attributed to the IT sector, which was the weakest today, losing about 1%. TCS was down 1.18%, HCL Tech down 0.8%, and Zomato down 1%. Banking stocks were also not spared. However, the Nifty Next 50 stayed flat, with IRFC and Adani Energy Solutions doing well. IRFC rose 10% on positive news regarding railway ticket price restructuring. Hindustan Zinc, Ambuja Cements, and Shree Cement also performed well, along with consumer stocks like Varun Beverages and Godrej Consumer Products.
Mover Of The Day
The mover of the day was RVNL, benefiting from the railway fare hikes coming into effect today, December 26. This is expected to increase industry revenue by about 600 crores.
Hindustan Copper rose 8.95%, hitting a 15-year high as copper reached a fresh peak.
Sectoral Overview
While IT was the worst performer today, it has been a top performer over the last three months, proving that you should not write off any sector due to cyclicality. Over the last year, PSU banks and Metals have topped the charts, while Media has been the weakest.
Sector of the Day
Nifty IT Index
Insight of The Day
The Sensex is completing 40 years, marking a massive milestone since it was conceived in January 1986.
Over these four decades, there have only been six instances where the Sensex lost more than 30%. Despite this, many investors only participate during these correction phases, often entering near peaks and exiting near bottoms.
Data shows that 80% of the time, there are average intra-year drawdowns of 20%, yet the markets eventually recover. If you look at the last five years, bull markets have far outpaced bear markets. For example, the COVID fall was a 38% drop over two months, followed by the current 221% rally.
If you have not made enough money in the last five years, it is time to reflect on your strategies and asset allocation.
