Where is the market headed?
Last night, near midnight, an announcement was made by both President Trump and Prime Minister Modi that India and the US have agreed to a deal. Under this agreement, the tariff rate for India will be 18%, which is much lower than China and many other emerging markets, placing India at a significant advantage.
There is always some give and take in any deal, especially when negotiating with a global power that is certainly a dominant force, but from that perspective, the outcome has been good. India did not succumb to pressures immediately and took its own time.
Consequently, the market opened on a very ballistic note today and, although it gave up some ground as expected, it still ended on a very strong footing. There is reasonable optimism for the path ahead because the stance of Foreign Institutional Investors is likely to change from the daily selling seen so far. While the numbers will be known later today, the midterm trend is expected to change.
There is a lot of chatter about sovereign gold bonds, and a midday look at the NSE screen showed that approximately 58 crores of business had been done by roughly 1 PM. This represents very brisk business rather than illiquidity. Sovereign gold bonds and ETFs are now vying for the same pie since there is no taxation difference between them.
However, sovereign gold bonds have a better counterparty in the sovereign compared to a private entity, an additional 2.5% interest rate not found in ETFs, and no expense ratio. ETFs typically eat away half a percent or 0.8% every year. For a serious gold paper buyer, sovereign gold bonds remain very attractive. Investors only need to check if the contract is liquid enough for their specific size, whether they are buying 5 grams or 5 kilograms. If it is liquid for the user and trading at a discount to fair value, it remains a decent product for gold investments.
Market Overview
Looking at the markets, the Nifty opened with a bang and hit a high of 26,340, which was the previous high. Within the first few minutes, it came down and stayed at that level for the whole day, closing at 25,700. This represents a gain of 639 points or 2.55%. Both the short-term and long-term trends have turned positive as the Nifty is now above the 200-day moving average.
Nifty Next 50
The Nifty Junior rose 2.65%, performing better than the Nifty and crossing its earlier pivot and moving averages.
Nifty Mid and Small Cap
While mid-caps were up 2.92% and small-caps rose 2.94%, these charts are so beaten down that it is difficult to say if this move will sustain.
Bank Nifty
The Nifty Bank remains the only major index with all positive momentum trends, closing up 2.43% in the realm of previous highs. The market will likely take time to digest the nitty-gritty details of the deal as they become available.
GOLD
Gold is coming back up, rising 4.3% today to 1,51,000 per 10 grams, while silver rose 8% to 2,66,950. These may be dead cat bounces that need time to consolidate and create a base, though the midterm and long-term outlooks remain positive.
SILVER
Advance Decline Ratio
Market breadth was strong with 450 advances to 50 declines.
Heat Maps
The Nifty heat map showed no red on the screen, with Reliance leading the pack. It is said that if there is a switch from Russian oil to Venezuelan oil, Reliance has the refineries to process that specific grade. Maruti, Titan, State Bank of India, ICICI Bank, HDFC, and Axis Bank all did well. Adani stocks like Adani Enterprise and Adani Ports rallied on rumors that recent issues highlighted in the US may not be pursued further.
In the Nifty Next 50, only VBL and Godrej CP were down. Capital goods stocks like MotherSon, ABB, Siemens, and CG Power did extremely well, as did Chola Finance, Divis Lab, Solar Industries, and Ambuja Cements.
Mover Of The Day
Avanti Feeds was a major mover at plus 20% along with other textile and shrimp stocks that are direct exporters to the US.
Sectoral Overview
All sectors were up today except for FMCG, which only moved 0.36%. Financial services, the real estate index at 4.8%, and the capital market index at over 5.3% saw exceptional gains.
Sector of the Day
Nifty Capital Market Index
Stocks like CDSL, Angel, Nippon, Nuvama, and Motilal performed well.
Nifty Realty Index
Godrej Properties, Lodha, Brigade, Sobha, and Prestige led the real estate gains.
U.S. Market
US markets were also up between 0.5% and 1%, with Apple leading from the front alongside Walmart, Costco, Amazon, and Intel, while Tesla and Microsoft remained soft.
Tweet Of The Day
The leadership has managed to clinch two big deals that few other countries have achieved, all while engaging with the EU, the US, China on Alipay and UPI, and negotiating with BRICS. This fantastic diplomacy is a very big win for India. The team believes it is a good day for the country and everyone should be looking up for the path ahead.
