Where is the market headed?
The markets currently remain dull, with the primary narrative centered on the USD INR exchange rate. The pair crossed the 91 mark today, which serves as a significant milestone.
With the currency reaching 91, there is a notable impact on Foreign Institutional Investors (FIIs). Many FIIs who were already holding back their investments may now feel even more hesitant. If an investor looking at India sees the currency drop almost 10% in the last six or seven months, they might worry about another 10% drop in the coming months. The logical move for them is to wait for the currency to settle and consolidate until it signals that it is no longer dropping at this sharp pace.
When looking at the broader perspective, the pace of the rupee’s decline over the last 10 years has actually been a manageable 3.5% CAGR. Prior to that period, it used to be around 5.2%. The Reserve Bank of India has done a fantastic job of holding the rupee steady, which is why this sudden fall over the last six months looks particularly sharp and scary.
Market Overview
The Nifty closed down 0.64%, returning to a downward move after a brief jump and falling below the two-day low.
Nifty Next 50
The overall scenario has suddenly turned grim, with the Nifty Junior down 0.42% and Mid-caps falling 0.77%.
Nifty Mid and Small Cap
Bank Nifty
The Nifty Bank also saw a decline of 0.72%, primarily led by Axis Bank. Axis Bank reported poor numbers and expectations of weak Net Interest Margins (NIMs), which weighed heavily on the banking space.
GOLD
In the commodities market, gold was down slightly at 13279, and silver reduced by 1.64% to 194912.
SILVER
USDINR
The USD INR is the only chart trending upward, having crossed the 91 level.
Advance Decline Ratio
The advance-decline trends reflected a listless market with only 94 advances compared to 406 declines.
Heat Maps
The Nifty Heat Map was almost entirely red, featuring losses in Reliance, ONGC, HCLTech, the Bajaj Twins, and a 5% drop in Axis Bank. Zomato lost 4.7%, while Adani Enterprises and others also struggled.
The Nifty Next 50 followed suit, with JSW, Adani Green, PNB, PFC, and REC all in the red. There were sporadic winners such as Vedanta, which rose following its demerger proposal approval, as well as DMART and Godrej CP. However, the overbearing pressure on the banking sector, led by the 5% fall in Axis Bank due to future NIM concerns, has set a weak tone for the entire market.
Mover Of The Day
Sectoral Overview
The sectoral trends showed no gainers, with the deepest losses occurring in real estate, defense, and private banking.
Sector of the Day
Nifty Realty Index
Real estate, which had attempted a recovery after a difficult November, was pushed down 1.29%, with stocks like Brigade, Godrej, Anantraj, Prestige, and Oberoi finding lower levels.
Nifty India Defence Index
Defense stocks also fell 1.28%, with Dynamatic Tech, Bharat Dynamics, Unimech, and Garden Reach feeling the pressure. This sector, which looked strong earlier in the year, has consolidated and seemingly begun a downward journey again.
U.S. Market
In the US markets, the last session was also weak. The Russell 2000 fell 0.8%, the Nasdaq dropped 0.6%, and the S&P 500 declined 0.16%, while the Dow Jones remained almost flat.
Notable losers included ServiceNow, which fell 12%, along with Broadcom, Salesforce, Costco, and Oracle. While some of these stocks might be part of the Weekend Investing US stock strategy, these are observations of market movement rather than specific recommendations.
Tweet Of The Day
A comparison of gold price movements since the 2011 peak shows that gold is up 144%. Surprisingly, the world’s top gold miners, Barrick and Newmont, have significantly trailed the commodity itself. Barrick is up only 8% over the last 13 years, while Newmont is up 99%.
This serves as a reminder to consider second-order effects. Investors often buy gold as a hedge to avoid counterparty risk. By purchasing mining equities, one introduces variables like management behavior, company debt, and market valuations that are not present in pure gold.
