Where is the market headed?

A good day again, for the small caps and the larger market. The run is still on. Large caps and Nifty are not finding that kind of momentum post that big move two days back. But nevertheless, the place we are at is a welcome place to be at.

With the operations Sindoor going back in the background now and a lot of post-analysis happening, a lot of focus is coming back to the defense sector. Defense sector stocks are zooming like nobody’s business, going to all-time highs. Normalcy is returning to the markets.

There is also good news on the inflation front—where inflation has come in lower. So, there is a very high chance now that rate cuts will happen in the first week of June. There are more rate cut expectations from the US also in the second half. Let’s see whether we get them or not.

But the worrying part on the global front is that the US yield continues to stay at a 15-year high—nearly 4.9% on 30-year yield. That is troublesome for sure.

In other parts of the market, gold is trying to find its feet. Oil, which was jumping up two days back, has also taken a back seat now.

Let’s now dive into the Indian market and see where things stand. Today’s topic of discussion is about this new trade from Reliance—or Reliance trying to sell off its stake in Asian Paints. A lot of lessons can be drawn from this potential trade. We’ll talk about it in the second half.

Market Overview

Nifty is up 0.36% for the day. Two days back, we made a huge gap-up move and we are still digesting that move. A move beyond 24,900 or 25,000 above this mark is probably going to spark a new wave of move. That’s the setup for now.

There’s a gap between 24,000 and 24,400 which is inviting for bears. In case of bad news, we may potentially try to fill that. But it doesn’t seem likely given the rest of the market.

Nifty Next 50

Rest of the market is moving up—Nifty Junior is up 0.73%

Nifty Mid and Small Cap

Midcaps are up 1.27%, Small Caps up 1.4%, clearing the previous high of the index.

Bank Nifty

Bank Nifty had a marginal down move of 0.25%, stagnating, but still sort of making a flag post this run. Once it consumes this consolidation and moves on, it could be a big move again—5,000-6,000 point kind of move can happen in Bank Nifty.

GOLD

Gold, as mentioned, is trying to find its feet—down 0.64%. Dollar index was falling today. If that continues to fall, some uptick in gold is possible.

Advance Decline Ratio

Advance-decline trend was 380 to 121—positive in favor of advances. The good thing is that during the day there was no significant loss in the advance-decline ratio. We started at 400+ advances and ended at 380—a decent day.

Heat Maps

Looking at the Nifty heat map, Maruti, Mahindra, ONGC, Coal India, BEL, Sriram Finance, and Tata Chemicals did well. Asian Paints lost nearly 2%, Cipla lost 1.6%, Tata Motors, Kotak Bank, and HDFC Bank also lost ground.

In the Nifty Next space, REC was down 3.3%, PFC 1.6%, Indigo also fell. Companies like Jubilant Food, Indigo, and others having business with Turkey may be hit due to growing anti-Turkey sentiment. The finance ministry is contemplating whether to cut off trading ties with Turkey, which could impact these companies.

IRFC, Lodha, Vedanta, Sriram Cement, Jindal Steel, HAL, Hyundai, L&T, BPCL, CG Power, Siemens, and DREF were all up nicely today.

Sectoral Overview

In sectoral trends, defense stocks stood out—up 3.2%. Over the last one week, defense stocks are up 10.5%; in one month, 22%; in three months, 41%; and in the last one year, 43%. Despite the big dip in the middle, defense has come back very strongly.

Back to today’s chart—metals did very well at 2.5%, real estate up 1.7%, capital market stocks 1.6%, and good gains in energy, IT, media, and oil & gas. A decent day for positives.

Some negatives were in banks, financial services, and private banks. PSU banks were up; private banks were down. Financial services as a whole were down.

Sectors of the Day

Nifty Metal Index

In the metal space—up 2.46%—Steel Authority gained 6%, Lloyds Metal 5%, National Aluminium 5%, Jindal Stainless 5%, and Hindustan Copper 5%.

Nifty India Defence Index

In defense—India Defense 14%, Mishra Dhatu 13%, Garden Reach 13%, Cochin Shipyard 7%, DCX 7%, and Unimech Aerospace 5.5%. The defense index is rising like an Akash missile.

Story of the Day: Big Lessons From RELIANCE’S New Trade

Now to the topic of discussion—big lessons from Reliance’s new trade. Reliance is looking to exit its investment in Asian Paints. They made this investment in 2008 and hold 4.9%. The acquisition was made for ₹500 crores and is now valued at ₹11,000 crores—about 24x.

Reliance is now planning to exit after being frustrated with the last 3.5 years in Asian Paints. Margins have been under pressure despite falling raw material costs. New competitors like Grasim have entered the paint segment, and Asian Paints’ market share has fallen from 59% to 52%. Berger and Kansai have been gaining.

The stock has fallen 19% in the past year, erasing ₹51,000 crores in value. Reliance may be concerned about shrinking margins and revenue slowdown. The moat of Asian Paints is under attack. Asian Paints has been a stellar wealth creator—30,000% growth in the last 25 years while Nifty was up 2,400%. But there is a time to remain invested and a time to exit. The last 3.5 years have been painful—Asian Paints is down 34%, Kansai down 33%, Berger down 16%, while Nifty is up 38%.

Grasim, though not yet fully active in paints, is up 54%, possibly reflecting anticipated market share shift. Markets discount future events well in advance.

Key lesson: being a non-discretionary investor helps you avoid emotional decision-making. Discretionary investors often stay emotionally attached to past winners. Index constituents change over time—Sensex, S&P 500, and Nifty. Companies lose their moat, and market leadership changes. Legendary stocks must keep innovating. Most can’t. Investors stay hopeful even when trends shift. The message is not that Asian Paints is no good anymore—we don’t know that—but that decisions become harder when made emotionally.

Non-discretionary systems like momentum investing make decisions based on price trends. They avoid guilt and allow exits when trends weaken. If the stock returns as a leader, you can re-enter.

Today, strength is in defense. Momentum investing would shift there. Discretionary investors struggle with emotional baggage and switching out. Change is the only constant. Opportunity cost is real—even for Reliance. Despite a 24x return over 17 years, some opportunity cost is lost. Professionals also go through emotional roller coasters, though perhaps with better control.

In 2008, Reliance bought Asian Paints at a high, after it rose from ₹40 to ₹80. It then fell 50% the next year. But they held on and now are exiting.

Retail investors often buy at tops in FOMO and exit in panic. Professionals didn’t panic in 2008. For retail investors, a rule-based, trend-following system removes emotion. Otherwise, decisions are based on gut, conviction, or news. Many have been confused about Asian Paints in the last 3–4 years. Large investor exits may trigger groupthink. Emotional attachment to a stock can overpower rational thinking.

Non-discretionary investing is all data, no emotions. Discretionary investing includes a lot of waiting and hoping. Both have pros and cons. But non-discretionary systems exit when the trend begins to weaken.

WeekendInvesting launches – The Momentum Podcast

In this episode of the Momentum Podcast by Weekend Investing, Alok Jain sits down with Mr. Thomas, a passionate retail investor, to uncover his remarkable journey—from exiting the markets at the worst possible moment during the 2020 crash to finding clarity and consistency through momentum investing.

Topics Covered:

✅How a train journey sparked his interest in the stock market

✅Emotional investing mistakes & lessons from the COVID crash

✅Why he shifted from value to momentum-based strategies

✅The Weekend Investing system that gave him peace of mind

✅How he balances aggressive bets with long-term wealth-building

Whether you’re just starting out or navigating your own investing style, this episode is packed with relatable stories and actionable insights.