We’re in the middle of a short trading week — Monday was a holiday and Friday is off again — so it’s a compact three-day stretch in the markets. But what a fiery start to this mini-week! The markets have exploded upwards, catching many off guard, and there’s a lot to unpack.

The rally seems largely driven by some softening of tensions in the ongoing US-China tariff saga. Over the weekend, former US President Trump took a step back from his earlier stance, announcing a dilution of tariffs on a range of tech products including computers, electronics, and semiconductor chips. These sectors alone make up about 25% of China’s exports to the US, so the rollback is quite significant. While the move may paint the US in a slightly weaker light, it shows a realization that the previous tough stance was unsustainable. China, not to be outdone, responded today by freezing deliveries of Boeing jets. This tit-for-tat continues, but markets are clearly optimistic for now.

Today, apart from the fireworks in the indices, we’re also diving into a very important topic — the real story behind bonus issues and stock splits. Many investors, especially newer ones, get excited when companies announce bonuses or splits, thinking they’re receiving something extra. But is that really the case?

Where is the market headed?

Market Overview

The Nifty has surged by 2.19% in just five sessions, jumping from 21,700 to an astonishing 23,300. Just a few days ago, if someone had asked whether we’d be at 23,300 by next Monday or Tuesday, the honest answer would have been, “I have no idea.” That’s how unpredictable and fierce this move has been. It’s almost a vertical rally, even sharper than some previous runs. While we might find a temporary top here or form a higher bottom during the next bounce, one thing is clear — we are not looking for new lows anymore.

This rally comes after five months of sideways consolidation since November. During that period, sentiment was gloomy, and people were forecasting all kinds of lower levels for the Nifty. And yet, here we are, bouncing strongly in the 21,000–23,000 range, proving once again how futile it is to try and time the market. The last five days have been a loud wake-up call for those expecting a continued downtrend.

Nifty Next 50

The Nifty Junior has also risen sharply, gaining 3% for the day and returning to the 63,000 level.

Nifty Mid and Small Cap

Midcaps followed the same pattern, also up by 3%, recovering nearly all the ground lost during the previous drop. Small caps have shown similar strength, rising by 3.06% and getting very close to their recent highs. If these highs are broken, we can expect even more participants to jump back into the market, driving prices further.

Bank Nifty

Bank Nifty also gained 2.7%, and what’s encouraging is that it has already crossed the important 52,000 mark, a level last seen at the end of March. From a charting perspective, this is a healthy signal.

GOLD

Gold, meanwhile, posted a small gain of 0.22%. Though not significant on the day, gold continues to stand tall around the ₹94,000 level, holding its ground after an explosive multi-week rally.

Advance Decline Ratio

Market breadth was excellent, with 473 stocks advancing. The last two sessions have seen almost entirely green heat maps, indicating strong across-the-board participation.

Heat Maps

Banking, auto, cement, steel, and energy stocks were all on the move. Even the usually slower FMCG sector was stable, though it did lag behind the others. The Nifty Next 50 stocks, however, were on complete steroids — DLF rose 6%, ICICI General Insurance was up 6%, and Lodha jumped 8%. These moves suggest growing confidence in the idea that recent market falls may now be behind us.

Sectoral Overview

Sectorally, real estate stood out with a stunning 5.6% gain. This is especially significant considering that the real estate index has been down 11% over the past year. The turnaround seems to be driven by the belief that interest rates have peaked and are likely to come down, boosting investor interest in housing once again.

Stocks like Anant Raj, Macrotech Developers, and Prestige all saw major gains. Despite the usual negative narratives around real estate — such as price bubbles, unsustainable valuations, or imminent corrections — prices continue to firm up. This isn’t unique to this cycle. Historically, during inflationary periods, real assets like real estate and gold tend to shine. People who’ve made money in equities over the past five years are now diversifying into real assets, including property.

Sectors of the Day

Nifty REALTY Index

Story of the Day : Bonus and Stock Splits

Let’s start with a simple example. Suppose Raju, a retail investor, sees a news flash one morning: ABC Company announces a 1:1 bonus. Raju gets excited. In his mind, a “bonus” sounds like something free and extra — a gift from the company. But in reality, nothing has changed in terms of value. If Raju had 100 shares priced at ₹200 each, after the bonus, he would have 200 shares priced at ₹100. The total value remains the same. This is no different than giving someone two ₹50 notes in exchange for one ₹100 note — it’s just optics. The bonus creates a buzz, gets people talking, and sometimes misleads those who don’t understand the mechanics.

The same principle applies to stock splits, though the mechanics differ slightly. In a stock split, companies simply reduce the face value of the share. For example, if the face value was ₹10 and there’s a 2:1 split, it becomes ₹5. The number of shares doubles, and the price halves, but again, the overall value remains the same. Unlike bonuses, stock splits do not affect reserves or alter the share capital in the same way. But both tools are often used to create excitement in the market. And while they may improve liquidity or make shares appear more affordable, they don’t actually make investors wealthier.

In fact, many companies use these actions to generate hype and play on psychological cues. People believe a ₹50 stock has more potential to grow than a ₹500 stock, even though the underlying business and valuation metrics remain unchanged. Many retail investors have jumped into stocks post-bonus or split, only to see prices normalize and excitement fade quickly.

So what’s the takeaway? Whether it’s a 1:1 bonus or a 2:1 stock split, the fundamental value of what you own does not change. There’s no new money entering your account. It’s just a clever reshuffling that creates the illusion of more. It may boost short-term sentiment or accessibility, but in most cases, it’s a psychological game — not a financial windfall.

As we close today’s update, take a moment to reflect. Have you ever been caught in the trap of jumping into a stock just because of a bonus or split announcement, only to be disappointed later? It happens to many, and that’s why it’s important to understand the mechanics before reacting to the headlines.

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