Where is the market headed?
The markets are currently in fine fettle and moving upward. Although there was some correction during the day, the market is surprisingly refusing to come down for many people. Over the last three sessions, the lower part of the market, specifically small caps and micro caps, has been running. As it always happens, people are in complete disbelief that these stocks can rise. Markets often climb a wall of worry, which is exactly where things stand right now as nobody is really expecting a large rally.
However, conditions are very favorable. The market has corrected and consolidated for a year and a half, interest rates are down, and inflation remains benign. With great deals recently struck with the EU, US, and the Gulf, everything seems to be in place for a rally. FII numbers are also beginning to look better.
Investors will not receive a formal notice to look out for a rally; it will simply happen. Eventually, people will feel the heat and realize the market has started to move and that they are being left behind.
There are two things investors need to do: first, recognize and keep a lookout for trends when they start, and second, do not try to time the market. It is best to always stay invested. While you might tweak your strategy with additional amounts by going in or out, a significant part of your capital should remain invested and asset allocated. There is a lot of narrative circulating right now suggesting that gold and silver have topped out and that asset allocation is no longer required. We will address that shortly. The core idea should be to have a plan, allocate accordingly, and simply sit back to enjoy the market.
A recent tweet from Neil Borate at Mint mentioned that net inflows into gold ETFs reached 24,000 crores in January, which is similar to equity inflows. Silver also saw inflows of another 10,000 crores. This has created a narrative that gold and silver have peaked because they have gone beyond equity, but nothing could be farther from the truth. These gold ETF inflows are not coming at the cost of equity, as equity ETF flows have maintained their levels near 24,000 crores. This money is coming from other allocations, perhaps replacing physical gold, sovereign gold bonds, or reducing debt allocations.
Globally, there is 170 trillion dollars sitting in bonds and less than 1% in gold. Significant reallocations will take place this decade, and writing off the precious metals rally based on January’s numbers is a stupid man’s narrative. Do not fall for it. Continue to allocate as per your plan. It is heartening to see people starting to allocate well, which is the real positive here, even if some on social media claim gold has topped out because Indians are chasing it. Short-term blips may happen, but smart investors recognize the advantage of long-term allocation.
Market Overview
Looking at the charts, the market is very stable, especially since the US deal was announced. On the first day of that announcement, there was a sell-off, but the market has remained in that range since. The Nifty is near 26,000, just a couple of percent from all-time highs, and needs a trigger to get there. The market is not a falling market. If there were any true weakness, the gaps from two days ago would have been filled, but they haven’t been. Either the market will skip filling these gaps and move up, or it may come down to fill them later if bad news arrives. One thing is certain: the market is not weak. Those waiting for 19,000 like some analysts suggest will likely keep waiting.
Nifty Next 50
Nifty Junior is up 0.14% and looking good with positive momentum scores.
Nifty Mid and Small Cap
Mid caps rose another 0.4% and small caps were up 0.5%. While the long term is yet to go positive on small caps, the current trajectory suggests it could happen. Small and micro caps were beaten down so much that investors lost hope, leading to a rally of disbelief. As it continues and crosses previous benchmarks, people will realize everything has doubled and wonder how to buy in. This is a repeating story. The outlook remains positive unless a global crash occurs, which is a risk that exists at any time.
Bank Nifty
GOLD
Today, gold was flat at minus 0.32% and silver was flattish at minus 1.67%. Notably, the Chinese gold exchange will close for nine days for the Chinese holidays, giving Western exchanges like Comex and LBMA a free run on price setting.
SILVER
Advance Decline Ratio
The advanced-decline ratio was reasonably fair with 272 advances to 222 declines.
Heat Maps
The Nifty heat map was largely green, with good gains in L&T, Maruti, Mahindra, ONGC, Zomato, TCS, Axis Bank, and Tata Steel, while HCL Tech, Bajaj Finance, and Bharti Airtel saw some losses.
In the Nifty Next 50 space, Motherson, Vedanta, DMart, and Torrent Pharma saw gains, while Hindzinc, Adani Power, Chola Finance, and BPCL lagged.
Mover Of The Day
The mover of the day was Zomato, up 5.1% after consolidating for a while. The news of Deepinder Goyal stepping down has been absorbed, and the stock is looking toward a new trend.
Sectoral Overview
In sectoral trends, capital market stocks saw good gains. BSE has delivered a rocking performance; looking at BSE versus NSE unlisted performance over the last five years, BSE is up about 2000% to 2500% while NSE is up 300%. Highs in capital market stocks like BSE, KFintech, Motilal Oswal, and HDFC AMC indicate the markets are in fine fettle. Media also did well for a second day, up 2.4%, and autos gained 1.3%. Metals and CPSEs saw gains, while pharma, PSU banks, and Nifty Bank were marginally down. FMCG and Nifty Financial Services remained flat.
Sector of the Day
Nifty Media Index
In media, Sun TV, DB Corp, PVR Inox, and Nazara performed well.
Nifty Capital Market Index
The capital market index has ramped up rapidly from 4,200 to 4,900 in just eight days, a move of almost 20%.
U.S. Market
The previous session in US markets was also strong, with the S&P 500 up 0.4% and NASDAQ up 0.7%. Oracle led with a 9.6% gain, while Palantir, AMD, Broadcom, and Microsoft rose 3% to 5%. Some of these are part of the Weekend Investing US stock strategy, though these are not recommendations. The NASDAQ heat map showed nice gains for AMD, Cisco, Broadcom, Nvidia, Meta, Microsoft, and Tesla.
Tweet Of The Day
Finally, consider the chart of Zoom Video Communications. During COVID, it went from 50 dollars to almost 500 dollars because it was assumed usage would explode, which it did. However, competition from Google Meet and others arrived, and high valuations could not be sustained. Even if you caught a winner at 70 or 80 dollars and saw it go up 10x, holding without an exit plan meant giving back those gains. This highlights why a proper framework for buying and selling is essential.
