Where is the market headed?
The recent strength the markets were showing has been given up, and it seems the conversation has entirely shifted to the USD/INR.
Regarding the USD/INR picture, If you look at the tweet, it shows the USD/INR chart over the last two decades. Historically, every sharp move in the USD/INR averages out to be about 19.8%. The pattern involves stagnation, then a sharp move up, then stagnation, consolidation, and another move up, and so on. This current move so far is about 8.8%.
If it were to match the historical average, we would be heading near 100. That’s the signal from past history, and we certainly hope it doesn’t repeat so soon. However, we have seen moves of 35% in 2013, 23% in 2012, and more recently, 15% in 2022. Currently, we are very near 90, around 89.9. It is very possible that in this move, we will go well beyond 90. Of course, there are no guarantees, but that is what history suggests once the currency is allowed to move.
Typically, the RBI attempts to protect the rupee, but now it seems they have allowed it to slide to enhance the competitiveness of Indian exports, as we were becoming relatively more valued compared to other competing currencies. The weakening rupee presents a problem because of the USD/INR. It will lead to a whole host of other issues, primarily causing our import bill and trade deficit to balloon even further. While exporters will see some relief and gains, the pressure on imports is going to be immense.
Markets came off after three days of trying to hold near the previous high. We have now given up almost half of the gains from the previous big up-move. Today’s market action was quite disappointing, as the position that was established after four days of effort has been somewhat erased.
Market Overview
The Nifty was down by half a percent.
Nifty Next 50
However, Nifty Junior is still holding up, down only 0.1% today, and Midcaps were mildly down by 0.2%. Small caps were down 0.44% and are not looking too healthy despite the larger-cap segments of the market moving up; small caps have not followed the leading parts of the market.
Nifty Mid and Small Cap
Bank Nifty
Nifty Bank saw a big fall of 0.68%. Historically, we’ve often observed that the overall market tends to follow the Nifty Bank’s trajectory. The rumor in the market today was the denial of a proposal to hike FDI in PSU banks from 20% to 49%, which had been rumored earlier. It’s unclear whether the initial rumor was significant or if the denial is the fake news, but regardless, both public and private banks were falling today.
GOLD
Gold also looked a bit tired after its recent 7 to 8-day run, down 0.63% to 12834.
SILVER
Silver was also resting today, down 1.32% at 174,000.
USD/INR
As mentioned, USD/INR is the focal point, closing at 89.85, up 0.31% today. This makes exporters happy, but generally, everything becomes more expensive for all of us.
Advance Decline Ratio
The advance-decline trend was strongly in favor of declines from the start of the day and remained that way throughout the session, showing a pretty clear prospect of a weakening market, at least in the very short term. The advance-decline ratio was 181 to 319.
Heat Maps
The Nifty heat map was predominantly red, with HDFC Bank, ICICI Bank, Axis Bank, Kotak, and SBI all losing ground. Reliance lost 1.26%, and ITC lost 0.8%. Power Grid, BEL, L&T, and Indigo, which were recent gainers, also saw losses today.
Bharti Airtel, Maruti, Dr. Reddy’s, Asian Paints, NTPC, and Hindustan Unilever were some of the small gainers in the Nifty Next 50 heat map. However, some PSU banks like Bank of Baroda and Canara Bank were still doing well. Bajaj Holdings and Bajaj Housing saw significant sell-offs today. Adani & Co, Adani Green, CG Power, Mazdock, Indian Hotels, IOC, and Hindustan Zinc were all coming off. JSW Steel, Vedanta, Enrin, Motherson, Siemens, Bosch, Britannia, Naukri, BPCL, and Canara Bank were among the stocks moving up.
Mover Of The Day
In the ‘Mover of the Day’ segment, Easemytrip jumped by 20%, seemingly due to the launch of a winter sale. The stock has been coming off significantly, down about 70 to 80% from its highs, so this nearly 20% gain in a single session is a welcome move for its investors.
Sectoral Overview
In terms of sectoral trends, almost all were down, with Capital Market and Tourism stocks both losing 1%. Nifty Financial Services, Defense stocks, and Private Banks lost between 0.8% and 0.9%, and the overall Banking space was down 0.7%. Only minor gains were seen in Nifty Pharma and Nifty MNC. Looking at the last one month, Capital Market stocks have gone up nearly 5%, while Real Estate stocks have gone down by about 6%. Media is down 5%. PSU Banks and Nifty IT are also up, at about 5% and 4% to 5% respectively. So, the last month has been a mixed bag. Over the last one year, Capital Market stocks and PSU Banks have been the leaders with around 24% to 25% gains, while Media stocks are down 27%. Real Estate and IT are also down 14% to 15%. These have been the major movers over the last year.
Sector of the Day
Nifty Capital Market Index
Within the capital market space, Nuvama, Nippon Life, 360 One Wam, HDFC Asset, and BSE all lost some ground, with the index down 1.02%.
U.S. Market
US markets in the previous session also lost some ground, with the S&P, Dow Jones, Nasdaq, and Russell indexes down between 0.4% and 1.2%. Among individual stocks, Broadcom lost 4%, RTX Corp nearly 4%, and GE Aerospace, Lockheed Martin, and Merck & Co. lost between 2% and 4%. Broadcom has seen a significant run recently, so this is a mild correction. Some of these stocks are part of the Weekend Investing U.S. stock strategy, and this is certainly not a recommendation.
Tweet Of The Day
In the ‘Tweet of the Day’ segment, we have a tweet from Yatin Mota stating that Yes Bank and Union Bank will now be included in the Nifty Banking index. This index currently has 12 constituents, and with Yes Bank and Union Bank being added, ICICI, HDFC, and Kotak Bank will see a cut in their weightage.
This announcement might have already started some adjustment in the market. Yes Bank and Union Bank will essentially see strong buy inflows because the index will be followed by ETFs and various trading strategies, leading to significant buying, if it hasn’t happened already.
A lot of times, news like this is already discounted to a large extent. This is a big boost for both Yes Bank and Union Bank. There was also a rumor that Yes Bank might be merged with Canara Bank. If that were to happen, the index would again be down to 13 stocks, but we will have to wait and see when and how that develops.
