Where is the market headed?
The week began with a significant amount of anxiety and pessimism following the United States’ attack on Venezuela and the abduction of their president. Despite these geopolitical tensions, global markets reacted with surprising resilience. Japan’s Nikkei 225 and South Korea’s Kospi index both rose by 3 percent, while China gained more than 1 percent. European indices were also trading in the green as the Indian markets closed for the day.
The Indian markets held up relatively well despite the global uncertainty. While large-cap indices saw some profit booking, particularly among heavyweight stocks in the Nifty Next 50 and Mid Cap indices ahead of the earnings season, the Nifty managed to reach a new all-time high.
A particularly positive note was the continued momentum in smaller and micro-cap indices. This consistent performance in lower-cap stocks suggests a healthy trend as the year 2026 progresses.
In the context of the situation in Venezuela, it is important to note that the country holds about 18 percent of global oil reserves, totaling more than 304 billion barrels. There is a developing narrative that oil supplies might actually improve, though it remains to be seen if the United States will gain a strategic advantage or how shale oil prices will ultimately define the outcome.
This geopolitical instability has already had a major impact on precious metals, with gold skyrocketing by 2.73 percent and silver exploding by 5.03 percent. Additionally, defense stocks remain a major focus as the world continues to navigate an uncertain environment.
Recently, many focused on the fact that markets had provided 0 percent returns over a twelve-month stretch while fixed deposits performed well. Now that a new peak has been reached, new narratives may suggest that the market is overvalued or overstretched, advising investors to hold cash.
However, statistical analysis of both Indian and US markets shows that investing at an all-time high has historically been beneficial and often better than investing on any random day. An all-time high is not a level to fear; the only investors who typically fear these levels are those without a strong exit plan.
Market Overview
Looking at the specific market data for the day, the Nifty was down 0.3 percent but maintained a positive outlook across short, medium, and long-term parameters. The session was highly volatile, with the Nifty testing lows of 26,270 in the first thirty minutes before scaling a new all-time high of 26,373 shortly after. Continuous profit booking throughout the day led to a close at exactly 26,250, which remains comfortably above the 50-day and 200-day moving averages. This profit booking is considered a standard part of market behavior and not a cause for concern.
Nifty Next 50
Other indices showed mixed results, with the Nifty Junior index finishing flat after a strong four-session streak.
Nifty Mid and Small Cap
The Mid Cap index was also flattish with a minor decline of 0.1 percent, while the Small Cap index rose 0.28 percent and finally managed to move past its 50-day moving average to end at 16,843.
Bank Nifty
The Nifty Bank index saw a slight decline of 0.18 percent.
GOLD
SILVER
Advance Decline Ratio
In terms of market breadth, there were 225 advances against 275 declines, showing that bears held a slight edge over bulls by the end of the day.
Heat Maps
The market heat map revealed significant profit booking across IT counters, with TCS down 1.06 percent, Infosys down 2 percent, and HCL Tech down 1.9 percent.
Zomato and Wipro also experienced notable losses. In the banking sector, HDFC Bank fell 2.4 percent, which had a major impact on the Nifty. Other decliners included Bajaj Finance, Jio Financial Services, and Sriram Finance, while Axis Bank, ICICI Bank, and Maruti managed to post gains.
In the Nifty Junior index, LIC lost 1.7 percent and some Adani stocks declined, but Solar industries rose 3.2 percent and Pidilite Industries gained 1.8 percent.
Mover Of The Day
In the mover of the day segment, CSB Bank stood out with a 15.38 percent gain following positive Q3 results and improvements in their loan book. Jtekt, an auto components manufacturer under the Toyota group, also performed well with a 7.8 percent increase.
Sectoral Overview
Sectorally, real estate was a top performer, rising 2.07 percent as it cleared resistance levels and moved above its moving averages, with Sobha gaining 5.7 percent. Defense also saw a resurgence, rising 2.04 percent. Conversely, the IT sector was the weakest performer of the day, followed by tourism, oil and gas, and services.
Over the last month, metals have been the top-performing sector at 11 percent, while FMCG has been the worst at 3.19 percent due to news regarding tobacco taxation.
Sector of the Day
Nifty Realty Index
Nifty IT Index
U.S. Market
In the US markets, data from January 2 showed the Russell 2000 Small Cap index up 1.06 percent followed by positive movement in the Dow Jones, despite a general downward trend across most indices over the last week.
The NASDAQ 100 heat map showed Nvidia and Google performing well, while Microsoft, Meta, Netflix, and Palantir faced significant losses.
Tweet Of The Day
To conclude, it is helpful to view market indices as momentum portfolios. A comparison of Sensex stocks from 1986 to 2025 shows that only six stocks have remained common over that 40-year period. This serves as proof that the index is a momentum strategy that automatically rotates stocks based on market capitalization every six months. Stocks that trend upward enter the index, while those that decline are removed.
This mechanism explains why the index has maintained long-term growth. While many people discuss the merits of buying and holding, it is important to apply that philosophy to a strategy with a clear framework rather than just holding individual stocks indefinitely without a plan.
