Where is the market headed?

The global landscape is currently defined by a sense of persistent geopolitical chaos. With unconventional narratives emerging from world leaders—such as the U.S. President making claims on Greenland following discussions about the Nobel Peace Prize—the environment has become high-risk and high-fear. Consequently, precious metals are rising daily as investors seek safety. Amidst this noise, there is a noticeable lack of focus on the real economy.

Even with the national budget just ten or eleven days away, the topic is largely absent from public discourse. While it is healthy for the market to stop viewing the budget as a make-or-break annual event, current trends suggest that only public sector banks are receiving significant attention, hinting at potential upcoming announcements for that sector.

A look at the futures market reveals important lessons about supply and demand. Currently, Gold February futures on the MCX are trading at 144,879, while the April futures are at 150,025. This 5,000-rupee gap represents a 3.4% difference over two months, which translates to an annualized rollover cost of approximately 20%. When bulls want to carry their long positions forward, they must pay this “carry cost.” A 20% annualized cost is exceptionally high, indicating that bulls are in complete control and bears have largely retreated.

This market structure, where the far-month contract is priced higher than the near-month contract, is known as Contango. It signals a very “hot” long market. Conversely, a situation called Backwardation occurs when the near-month contract is more expensive than the far-month contract, as seen in silver a few months ago. Backwardation suggests that sellers feel confident about a potential downside and bulls are taking a backseat. Monitoring whether these annual rates stay at 20% or drop toward 5% is a vital way to track shifting market balances.

Market Overview

The Nifty has been stagnating within a 400-point range for six consecutive days. While it lost 0.42% recently, this consolidation is generally viewed as a positive sign for the long-term trend.

Nifty Next 50

Other indices show similar indecision: Nifty Junior dropped 0.24%, and Mid-caps fell 0.44%.

Nifty Mid and Small Cap

Small-caps, however, appear weaker, losing 1.13% and breaking below their recent range and moving averages.

Bank Nifty

In contrast, the Nifty Bank remains relatively intact, losing only 0.34% despite weakness in private banks.

GOLD

Gold and Silver continue their upward momentum, rising 1.87% and 3.74% respectively, with all momentum trends remaining positive.

SILVER

Advance Decline Ratio

The market breadth remained stagnant throughout the session, with the advance-decline ratio staying extremely flat. Starting the day at 111 to 389, the numbers showed almost no change, characterizing what felt like a dead market.

Heat Maps

This lack of movement was driven by significant hits to major heavyweights. Reliance dropped 3%, Wipro fell 8%, and ICICI Bank declined 2%. Other major names like TCS, Infosys, Titan, NTPC, and Adani Ports were also down, along with Jio, which shed 1.13%. Within the private banking space, Kotak Bank and Axis Bank were the exceptions, managing to stay up. Other gainers included Bajaj Finance, Maruti, and Hindustan Unilever. Notably, ITC saw a rare gain of 1.1% after a very long period of underperformance.

The Nifty Next 50 heat map told a story of two halves, particularly for public sector banks. While PNB and Bank of Baroda were up in the early hours, they were smashed down in the second half of the day. In contrast, CG Power continued its strong run, and both HAL and LTI performed well, successfully bucking the broader downward trend in the IT sector. Dr. Reddy’s and Hindustan Zinc also posted gains, even as many other stocks remained in downward mode.

Mover Of The Day

Wipro stood out as a major mover of the day for the wrong reasons, dropping 8% following weak Q3 guidance. The stock has provided virtually no returns for many years, representing a period of very poor outperformance.

Sectoral Overview

Sectoral trends were predominantly negative. Real estate led the decline with a 2% fall, followed by media at 1.8%. Oil and gas and capital markets both dropped 1.5%, while infrastructure and commodities fell 0.9%. Many of these sectors had previously been performing well but were sharply corrected in this session. Defensive plays in FMCG were pushed into action, rising 0.67% primarily due to Hindustan Unilever. MNC stocks rose slightly by 0.39%, while consumption and auto sectors remained flattish.

Sector of the Day

Nifty Realty Index

The real estate sector, in particular, looks quite weak, appearing to form a head-and-shoulders pattern as stocks like Godrej Properties, Brigade, Signature Global, Lodha, and Sobha all declined.

Nifty Media Index

Similarly, media stocks including Prime Focus, PVR, Nazara, Network 18, and Zee Networks moved lower, marking a collapse in that space.

U.S. Market

International markets showed a mixed performance in the previous session. The Dow Jones fell 0.2%, while the Russell index ticked up 0.1%, with most other indices remaining flat. Notable losses were seen in Palantir, CVS Health, ServiceNow, Salesforce, and Intel, which lost between 2.5% and 4%. It is important to note that while some of these stocks might be part of specific investment strategies, these mentions are not recommendations, and the standard disclaimer applies.

The Nasdaq 100 heat map also reflected a mixed bag; while Adobe, Google, and Apple saw significant losses, chip-oriented stocks like AVGO, ASML, Micron, and AMD managed to move higher.

Tweet Of The Day

A poignant example of investment pitfalls can be found in a recent story regarding DLF stock. A senior real estate consultant purchased the stock near its IPO peak of 1,000 rupees in 2008. Eighteen years later, despite the stock hitting 940 in 2024 and subsequently falling back to the 640 range, the investor is still holding on. This highlights several critical errors:

• Lack of an Exit Strategy: Failing to draw a line on capital loss (e.g., at 30% or 40%).
• Anchoring Bias: The refusal to sell until the price returns to the original purchase point.
• Opportunity Cost: Forgoing two decades of potential gains in an index fund while capital remained trapped in a losing trade.

Investors must remember that the market does not “owe” them a return to their entry price. Getting emotional or revengeful toward a stock is a recipe for stagnation. While the stock did recover from a low of 60 rupees to 600, holding for 18 years for a 40% loss remains a lesson in the dangers of “stupid liquidity” and concentration risk.