Where is the market headed?
Over the weekend, the budget was announced, and most have likely already reviewed the broader details. From an institutional and fiscal perspective, the government appears to have performed well by staying on the current path. Any slip in the fiscal deficit would have caused significant alarm for the economy and from the perspective of Foreign Institutional Investors, but thankfully, that did not happen.
This stability was reflected in the market today; while the market did not fully recover the losses from Sunday, it did bounce back slightly. With a stable rupee and leading index, the budget seems to have been digested. If a major reaction were to occur, it likely would have happened today. However, this doesn’t clarify the future trend, as the market is currently in a trendless state, neither extremely weak nor strong.
Outside of the equity markets, there is significant dislocation in precious metals. Silver dropped approximately 40% in just two or three days, and gold fell nearly 20%. While these metals had been rising rapidly and a sharp correction was warranted, the severity of the fall was unexpected.
There is currently a lot of outcry regarding the application of additional STT on futures and options, though the cash market was fortunately left untouched. Views on this are divergent. Some believe it is responsible for the government to prevent the next generation from being sucked into derivatives trading, similar to the ban on online gaming. However, speculators will always find ways to trade.
Another concerning situation has arisen regarding Sovereign Gold Bonds (SGBs). Started in 2015-16, these were intended to be capital gains tax-free upon maturity.
Neither the prospectus nor the RBI FAQs mentioned that buying them from the secondary market would change this status. Now, the budget states that from the 1st of April 2026, those who bought bonds from the market will be taxed. This impacts people who bought years ago expecting a tax-free product. This is a retrograde step that damages the government’s credibility. While people will pay the 12.5% tax, the loss of reputation is the bigger cost.
Market Overview
Looking at the data for the 2nd of February, the market has been falling since early January. After a sharp 2% drop yesterday, we recovered about 1% today. It is too early to say a bottom has been formed, but the bounce shows that investors are not extremely distressed by the budget. The budget is being viewed through two lenses: investors looking at the macro economy see it as positive, while the middle class may see it negatively due to the lack of tax sops and increased STT.
Nifty Next 50
Currently, momentum trends for Nifty Junior, Mid Caps, and Small Caps remain negative despite today’s small jumps.
Nifty Mid and Small Cap
Bank Nifty
Bank Nifty gained 0.35% and remains near all-time highs.
GOLD
Gold has lost its short-term trend, though mid and long-term trends remain positive despite the 20% fall. There is currently a massive gap between the “paper” market and physical prices. While gold is quoted at 1,47,000 per 10 grams on exchanges, physical market prices are much higher, around 1,50,000 to 1,60,000.
SILVER
Silver shows a similar gap. This suggests a disconnect where the paper market may eventually face a reckoning.
Advance Decline Ratio
The advance-decline ratio was positive today with 344 advances to 156 declines.
Heat Maps
Reliance, Mahindra, ITC, and L&T led the heat map, while some IT stocks and Axis Bank were down.
Mover Of The Day
In the mover of the day segment, Latent View Analytics rose 9.3% on strong profits.
Sectoral Overview
Sectorally, capital markets gained nearly 3%, suggesting the market has brushed off STT concerns.
Sector of the Day
Nifty Capital Market Index
U.S. Market
Conversely, the US market saw a big down day with the NASDAQ and Russell 2000 falling. Stocks like AMD, Intel, and Meta were all red. Regarding the JP Morgan gold forecast, many believe large banks hold short positions and drive prices down to cover them.
Tweet Of The Day
A significant point of discussion in the market right now is the curious timing of a recent report from JP Morgan. On the 29th of January, the bank released a high-profile forecast suggesting that gold could soar to $8,000 per ounce.
What has raised eyebrows across the industry is that almost the exact moment this “flash” headline hit the news wires, the precious metals market was hit by a massive “smash.” Prices were slammed down immediately following the release of this ultra-bullish long-term outlook.
While many are hesitant to dive into conspiracy theories, certain market behaviors are becoming increasingly difficult to ignore when they happen right in front of us. There is a strong thesis circulating that large institutional banks often hold significant short positions in precious metals.
