Where is the market headed?
The markets attempted to open the new month on a positive note, with the Nifty technically hitting a new all-time high this morning. However, this was immediately followed by surprising selling pressure. Despite the strong GDP numbers that were posted at the end of the previous week, the market failed to sustain its gains today, suggesting that the good news had already been fully discounted. No recent economic number appears to be surprising the market anymore.
Meanwhile, the Rupee continues to fall against the US Dollar. It hit 89.8 during the first half of the day before recovering slightly to around 89.5, but it is clearly headed for the 90-handle. That day does not seem too far away now, and once the Rupee breaches 90, it will likely remain in the 90s for some time. This movement indicates that the RBI is not currently supporting the Rupee and is allowing it to adjust to its fair value relative to other emerging markets.
The performance of the Rupee is quite concerning, with media outlets even comparing it to currencies like the Turkish Lira and the Argentine Peso, a comparison that was once unimaginable for the Indian Rupee.
Market Overview
As for the charts, the Nifty chart shows that the single large move three sessions ago was equivalent to several sessions of action. Post that move, the market has been consolidating at the top for the last three sessions, down -0.1% today. Nothing significant has been lost, but the market is showing impatience at the Nifty highs to make newer highs.
Nifty Next 50
Similarly, Nifty Junior was up 0.12%, Mid-caps down 0.1%, Small-caps down 0.23%, and Bank Nifty down -0.12%. All key indices have been essentially flat for the last two sessions, indicating a complete lack of any very short-term trend across the entire market.
Nifty Mid and Small Cap
Bank Nifty
GOLD
The actual gains are coming from precious metals. Gold is up another 1%, trading at ₹12,967 per gram, which is very close to its previous weekly high. The fact that gold is rising (having already achieved an all-time high close) suggests a less-than-peaceful global situation, as gold typically rises in times of uncertainty.
SILVER
Even more dramatic is Silver, which is up another 1.9%, trading at ₹1,74,613 per kg in Indian markets. In just the last five sessions, silver has climbed more than 20%$ an astonishing move in the precious metals space, which also signals underlying global instability.
USD/INR
The USD/INR closed up 0.24% by the end of the day, with some reversion from the 89.8 high. However, this move, which began seven or eight sessions ago, looks decisive, and there is a sign that the rupee will be beyond 90 by the end of the year.
The strengthening GDP numbers should have led to a stronger Rupee, but the currency’s slide suggests the market has already discounted even better numbers than those announced, which is reflected both in the equity market’s lack of movement and the sliding Rupee.
Advance Decline Ratio
The market’s health is under a little pressure in the very short term. The number of declines in the Nifty 500 rose throughout the day, ending with 281 declines against 219 advances. The rise in declines and fall in advances is not a good sign for the very short term.
Heat Maps
The Nifty heat map was evenly divided between gainers and losers, with losses in Bajaj Finance, State Bank, HDFC Bank, Indigo, Sun Pharma, Titan, Bharti Airtel, and Adani Enterprise.
Gains were seen in BEL, Adani Ports, Hero MotoCorp, Tata Motors, HCL Tech, Tech Mahindra, Coal India, and Kotak Bank.
The Nifty Next 50 heat map showed good gainers in Vedanta and Hindustan Zinc from the commodity space, and Hyundai and TVS Motors from the auto space. The Auto sector’s performance is driven by the release of some good November monthly sales numbers, thanks to the festive season and the Goods and Services Tax (GST) kicking in this month.
The next month may be a more comparable period. Conversely, there were down moves in stocks like Lodha, DLF, Canara Bank, and REC. This is somewhat confusing because interest-rate-sensitive stocks, such as real estate companies, should be moving up in anticipation of a rate cut, which is clearly not happening. We will need to observe if interest-rate sensitives start moving in the next couple of days, driven by the strong auto numbers.
Mover Of The Day
In the Mover of the Day segment, Wockhardt was up 19% following the U.S. FDA’s acceptance of a new drug application for an antibiotic. Pharma companies often experience very sharp moves due to FDA approvals or declines, making their general trend difficult to predict. This is a significant move for Wockhardt after a long time, and we’ll see if it builds on this momentum.
Sectoral Overview
In sectoral trends, Real Estate lost 1% and Pharma lost half a percent. On the buying side, Auto stocks did well at 0.79% and Metals at 0.9%. These four sectors—Autos, Metals, Pharma, and Real Estate—were the main movers and shakers of the day. Real Estate has been in the dumps during the recent market run-up and has completely gone flat.
Sector of the Day
Nifty Realty Index
News reports indicate that real estate sales have slipped in many parts of the country, with many pockets actually down in double digits in terms of sales, which explains the grim mood in the sector. Lodha Developers, DLF, Prestige, and Godrej led the sector down.
U.S. Market
On the US Market front, the previous session saw decent gains of 0.5% to 0.8% across the S&P 500, Dow Jones, Nasdaq, and Russell. Inside the market, Intel gained almost 10% (a continuation of the trade that began with a huge gap-up in September after the US government decided to take a stake in the company), along with good gains from Meta, ConocoPhillips, Amazon, and IBM. A disclaimer is given that some of these stocks may be part of the Weekend Investing US stock strategy and are not recommendations.
Tweet Of The Day
The “tweets of the day” segment provided crucial global context. The first chart showed the Japanese 10-year yield and the US 10-year yield over the last 20 years, moving almost in unison. This suggests the Japanese economy acts as a leading indicator for the US economy, highlighting the strong global linkage between the markets. The Japanese yield, which was at virtually negative yields in 2016, has since climbed to almost 1.86%.
Given that local investors own almost all of the Japanese government debt, as Japanese yields rise, the Yen carry trade—where money was borrowed at 0% and invested in higher-yielding assets like US bonds—will start to unwind. If the gap between the US and Japanese yields narrows, the attraction for Japanese investors to seek higher yields abroad will lessen, leading to huge money flows and push pressures in the global economy. The bond market is significantly larger than the equity or commodity markets, making these flows very important.
The second key tweet concerned the Fed Chair. Strong rumors suggest that the current Fed Chair, Jerome Powell, may be on the way out, with President Trump having someone else in mind. The betting market is placing a very high 73% probability on Kevin Hassett as the next Fed Chair. The markets are beginning to adjust to this potential change, as the announcement of the new Fed Chair will cause enormous short-term moves globally. Markets will immediately try to discount the new Chair’s stance—how quickly interest rates may drop, how dovish or hawkish they are, and their known bias toward asset classes like cryptocurrencies or gold—making it a critical development to watch.
