Where is the market headed?
The global geopolitical landscape has intensified following the US military action on an Iranian refinery, sparking renewed turmoil across international markets. This event triggered sharp declines in gold, silver, and NASDAQ futures, alongside a collapse in the Japanese and South Korean markets, while crude oil prices climbed.
Although the Indian market opened amidst these challenging global cues, it surprisingly remained barely dented by the end of the trading day. This resilience offers an encouraging signal, demonstrating the domestic market’s refusal to go down despite substantial global headwinds.
A key factor behind this underlying strength involves the MSCI Index, which tracks emerging markets. This index had reached a 50% exposure due to the South Korean and Japanese markets. With major stocks like TSMC and Hynix expected to come off in the upcoming rebalance, allocations for all other markets are projected to rise.
This shift is likely to materialize into a return of Foreign Institutional Investor (FII) buying in India, as other markets drag down the overall allocation. While FIIs tracking the MSCI index previously had to sell Indian equities, a reversal of this trend means they will have no choice but to add back to India, which will ultimately be beneficial for the domestic market.
Market Overview
The Nifty closed absolutely flat at 24,200, successfully climbing back throughout the day after a lower opening.
Broader Market Indices
Meanwhile, the Nifty Next 50 was marginally down by 0.4%, mid-caps remained absolutely flat, small-caps managed a gain of 0.3%, and the Bank Nifty ticked up by 0.15%.
Heat Maps
The IT sector witnessed a sudden surge, driven by Tata Consultancy Services (TCS) securing a large global order from ABB for AI services, which lifted TCS shares and prompted other stocks to latch onto the positive theme. Conversely, the promoters of Happiest Minds are looking to divest their business, seeking to sell their approximately 45% stake at nearly its lowest point in several years.
This move suggests a lack of internal confidence left in the industry regarding their own company, creating mixed sentiments about whether IT stocks are ripe for buying at this juncture. From a longer-term or momentum perspective, the sector remains largely untouchable for now.
The day saw Bajaj Auto, NTPC, Kotak Bank, and ICICI Bank emerge among the gainers. On the flip side, marginal losses of a couple of percent were observed in stocks like Reliance, HDFC Bank, DMart, Enrin, Adani Power, Muthoot Finance, and Lodha, without showcasing any major movements.
Top Gainers & Losers
Within the public sector, PSU banks saw some upward movement in select stocks. Individual stock gainers stood out prominently, with Newgen Software surging 14%, Sonata Software moving up 10%, CE Info Systems climbing 9%, and both Pine Labs and Kalyan Jewellers gaining 7%. In contrast, the top losers included Jammu and Kashmir Bank shedding 5%, Siemens Energy declining 3.5%, and Allied Blenders, Ather Energy, and PhysicsWallah each losing between 3% to 3.5%.
Sectoral Overview
Sectoral trends revealed a very positive daily performance for Nifty IT, even though the monthly chart indicates the index is still down 8.5% for the month. On a weekly basis, Nifty IT has recovered by 6%, while media stocks also gained 2%. The rest of the sectors remained highly muted, and the FMCG sector lost 1% for the day.
Looking back over the last month, the most significant upward moves occurred in pharma at plus 14%, real estate at plus 17%, tourism at plus 7.5%, and defense at plus 6.5%. Conversely, the biggest monthly losers were IT, Central PSEs, PSEs, PSU banks, and FMCG stocks.
Sector of the Day
Nifty IT Index
Within the IT space specifically, TCS, HCL Tech, Tech Mahindra, Infosys, and Mphasis all advanced between 3% to 5.5%. Moving above the current pivot will signal the first real signs of things thawing for the IT index.
U.S. Market Update
The previous session for US markets presented a mixed bag, with the S&P 500 rising 0.4%, the Dow Jones gaining 0.2%, the Nasdaq up 0.2%, and the Russell 2000 losing about half a percent. Among the top gainers in the Nasdaq 100 were Meta Platforms, Nvidia, T-Mobile, Sandisk, and Keurig Dr Pepper, while the top losers featured CrowdStrike, Lilam Pharma, Datadog, Fortinet, and Period Sciences. Some of these equities could feature in the US stock strategy at Weekend Investing, though these do not constitute official recommendations.
Nvidia advanced nearly 4% and Meta jumped 6%, highlighting massive moves as significant capital withdraws from the AI and semiconductor space to reallocate back into these old favorites. Meanwhile, Walmart moved up, but SpaceX continued its steady decline by dropping another 4.5%, alongside losses in Netflix, Intel, Micron, and Marvell on the Nasdaq.
Tweet Of The Day
Data from Bloomberg Intelligence highlights an alarming shift in global foreign currency reserves over the last 25 years, showing that the US dollar’s share has fallen from 60% to 40%, marking its lowest level in the century. This clear data challenges the common narrative that dollar dominance is completely unshakeable, as an increasing number of countries choose to reduce their reliance on dollar reserves.
Rather than actively selling off assets, nations like India are letting existing US Treasuries mature without rolling them over, thereby avoiding market disruption while plowing that capital directly into gold to boost their reserves. The prevailing outlook suggests that while the dollar will remain the primary transactional currency of the world alongside a strengthening Yuan and other currencies, gold is solidifying its position as the bedrock of central bank reserves.
Continuous gold accumulation is evident not just in countries like China and Poland, but also among stablecoin entities like Tether, making crypto companies some of the largest buyers of gold in the current economic landscape. This macroeconomic backdrop presents an excellent opportunity for investors to allocate capital toward gold if they have not already done so, while those who are already allocated can comfortably sit tight.
