Where is the market headed?
U.S. tariffs have returned to the forefront of the market narrative. A new bill is being presented in the U.S. Parliament, reportedly with approval from Trump, which proposes tariffs on India. This move stems from the belief that Russian oil is still being consumed in India, a practice the U.S. wishes to discourage.
The market experienced a significant downturn following this news, compounded by general weakness in the global marketplace. Metals, which had enjoyed a long rally, gave up gains in a spectacular fashion. The broader market lacked positivity in almost every sector.
A major shift is occurring in global reserves, where the adoption of the U.S. Dollar is being replaced by gold. Data from the IMF and Bloomberg illustrates this trend clearly: a decade ago, U.S. Dollars made up nearly 58% of global reserves, but that figure has fallen to 40%. Meanwhile, gold has risen from approximately 30-35% to 50% of global reserves. Other currencies like the pound, yen, and euro have remained relatively stagnant in their share over the same period.
This shift has accelerated over the last three years. While the U.S. Dollar remains the dominant transactional currency, there is a growing reluctance to hold it as a reserve asset. This is comparable to the crypto world, where one might use a stablecoin like Tether to facilitate a trade, but chooses to hold Bitcoin as the actual reserve of value. The freezing of Russian assets by Western powers in 2022 served as a catalyst for this change, and recent events, such as developments in Venezuela, have cemented the idea that no country’s offshore assets are entirely safe. This rapidly changing global monetary system will likely have long-term repercussions.
While no outcome is guaranteed, there is a reasonable probability that this pattern is repeating. Since the bottom in late 2015 and early 2016, gold has climbed from roughly $1,100 to $4,400, marking a 4x increase. If gold were to complete a 660% gain from that bottom over a similar 624-week duration, it would reach a price point of $8,000 by late 2027. This suggests that while a 335% gain has already been achieved, the price could potentially double again over the next 24 months. This prognosis will be revisited in December 2027 to see how the thesis held up against reality.
Market Overview
Domestic markets were hit hard, with the Nifty falling 1.01%. Despite crossing the 26,000 mark roughly twenty times recently, the market has struggled to sustain momentum above that level.
Nifty Next 50
The Junior Nifty (Nifty Next 50) plummeted 2%, wiping out nearly six days of gains in a single session and turning the short-term trend negative.
Nifty Mid and Small Cap
Mid-caps and small-caps followed suit, dropping 1.88% and 1.94% respectively, with momentum trends signaling a negative outlook.
Bank Nifty
Even Nifty Bank saw a 0.51% decline.
GOLD
Across the board, asset classes including gold, Bitcoin, and silver moved lower, though gold and silver maintain positive long-term trends despite the daily dip.
SILVER
Advance Decline Ratio
The market breadth was overwhelmingly negative, with only 42 advances compared to 458 declines. Such a decisive downward move suggests that a quick recovery is unlikely; the market will likely need to find a new base before building up again.
Heat Maps
The heat map was almost entirely red, with rare exceptions like ICICI Bank, SBI Life, and Eicher Motors managing small gains. Major stocks like Reliance, TCS, Infosys, and Adani Enterprises all saw declines. In the Nifty Next 50, oil and energy stocks were slammed, with Hindustan Zinc dropping 6% alongside heavy losses in Jindal Steel and PSU banks.
Mover Of The Day
In a rare positive move, Balaji Amines surged 14% following the grant of a mega project.
Sectoral Overview
Aside from that, sectoral trends were bleak. Nifty Metals fell 3.4%, erasing significant recent progress, though its yearly gain remains at 31%. Other sectors like energy and oil and gas fell over 2.8%, while private banks and defense saw comparatively smaller losses of less than 1%.
Sector of the Day
Nifty Metal Index
U.S. Market
In the U.S., the Dow Jones fell 0.9%, partly due to news that President Trump might sign a bill preventing defense companies from engaging in stock buybacks. While some of these stocks may be part of company strategies, these mentions are not formal recommendations. Interestingly, mega-cap tech stocks like Google, Microsoft, and Nvidia saw gains, showing that the news primarily impacted smaller companies.
Tweet Of The Day
There is currently significant discussion regarding dividend yields, especially as some stocks have seen their capital value bleed away. It is important to remember that dividend yield is often a “rear-view mirror” metric. It reflects past profits and provides no guarantee for the future.
Rapidly falling stock prices are often a precursor to operational difficulties; if the capital value drops significantly, dividends are likely to be reduced in the coming years. Relying solely on dividends can be risky, as seen in the early 2000s when high-yield oil stocks remained stagnant for years while inflation was high. The primary focus should generally remain on capital appreciation.
