The markets took off in a big way. All the short sellers and bears in the market have been caught by surprise. Almost 500 points at one point in the Nifty. No apparent reason for this gain but the fact that we have been simmering in that range that I was telling you and a big relief rally either way would have come and that has come out in the open.

Will INR fall protect your purchasing power? That’s what we will discuss in the second half of the video.

Where is the market headed?

Market Overview

The market heading basically looks like it has come out of the LAL and the entire landscape of the short term at least has been changed. Today we have gone ahead, gotten out of this range, gotten above the moving average, filled this gap. A lot of things have happened just in one session and a few more sessions of green is going to change a dramatic picture of the market. The trend line also may break above 24,600 or so, but 24,200 or near about is also a good place to be at right now. So I think it’s a very, very positive move in Nifty.

I don’t have the FII numbers for the day yet but in the next hour or so we should be able to get that. And that I think should be positive today, given the move that we’ve seen.

Nifty Next 50

Nifty Next 50 also up 1.25%, although nowhere near the Nifty move but still a good move here.

Nifty Mid and Small Cap

Mid-caps are doing very well actually. So you can see very nice support taken here on the moving average and then moving up very, very rapidly. So 1.07% on mid-caps and small caps also looking good at 0.55%, although muted versus the rest of the market. But small caps, if you notice, haven’t really fallen from their all-time highs as much. I mean, we are hardly about 3 or 4% from all-time highs. So this is like a catch-up that is happening on larger names, and small caps are just sort of simmering there.

Nifty Bank Overview

Bank Nifty is also moving up 1.07%, and this, although it is nowhere out of the range that it is locked in, is still a good day I would say at 1% of the gain.

Advanced Declined Ratio Trends

Momentum trends are definitely towards the green. 362 advances to 134 declines. That is certainly a shot in the arm for the bulls.

Nifty Heatmap

All green kind of Nifty 50 heat map today: 6% on Bajaj Finance, 2.3% on Kotak Bank, Bajaj Finserve 7.8%, Infosys 4%, HCL Tech 3%, Red Reliance, TCS, and the auto space just took off.

Maruti 5.6%, Bajaj Auto, Mahindra, Titan, Tata Motors, Hero Motors all really, really revving up. Ultra Semco up, Grasim up, Trent up, Levers, ITC, Adani Enterprise all were up. Pharma taking a backseat—that is the defensive stocks taking a backseat in terms of pharma. You also had ABB, Union Bank, Adani Total Gas, JSW, Adani Power etc., also losing ground along with Indigo, and you had Zomato coming back after many sessions. Mother Sons up 2.8%. United Spirits, Hal Dmart, PD Lite Rec, PFC, PNB, Chola Finance were some of the other big winners from this space along with TVS Motors, which was leading the auto pack.

Sectoral Overview

The sectoral trends—no prizes for this guess today: 3.8% on autos. So fantastic gain in just one session, and now with just this one gain, autos are now leading for the past one week and are at the third position for the last one month. So very nice comeback from autos. IT stocks also doing quite well at 2.3%. Consumption stocks taking a nice lead at 2.2%. So it does seem like the market is getting some whiff of some release of consumption in the hands of the people. Maybe the IT relief that we have been hearing does come true in the budget coming forth, but that’s still more than three weeks away.

Public sector enterprise stocks, commodity stocks, and infrastructure also rallying more than one and a half percent and overall it was a great day of at least reassurance that the market is not looking to go down. This move today certainly tells you that there is an undercurrent of positivity and the market is willing to bet that new money can come in here and take it up.

Sectors of the Day

Nifty Auto Index

Eicher Motors up 8.6% for the day. Ashok Leyland, Maruti, Mahindra, TVS Motors, Bajaj Auto all up more than 3%. Several of these stocks have been very badly hit in the last three months, and some pullback here is happening. Although by today’s move, you really cannot say that autos are out of the downtrend, but certainly a good day to look at this.

Lowest Momentum Stock

Asian Paints

We also have now the Portfolio Momentum Score report available on the Weekend Investing website.

So from this report, we have seen that a large-cap stock like Asian Paints, for instance, momentum score is extremely low—2 out of 100 is the momentum score. And this somewhere early in 2022, it would have told you that momentum score is waning and you would have been able to look at alternates from your portfolio.

Or for instance, in the last many years, Asian Paints has not really figured out in any of our portfolios because of this reason. Maybe in one or two cases, this spurt here would have got you in, but then you would have gotten out also with small losses. So this is how it sort of keeps you away from continuously being in stocks that are not moving. And once it does start moving like it did in the past, the Momentum Score will go up and you can pick that stock up again.

Since January 2021, you can see how badly this stock has performed at minus 15% versus the large-cap space. The average large-cap space is at 71%. So just, you know, your allocation to this stock has cost you so much of a gap between what you could have made just on the general market. I’m not even talking about the big winners within the large-cap space. So always stay with the winners, allow losers to be on the side, get out of them, and always—you can always come back and ride them again once they start to perform.

Story of the Day : So will INR fall protect your purchasing power?

INR is right now in a free fall. You can see in the last few sessions since the governor has come in, the new RBI governor has come in, it’s really accelerated the fall. From 84-odd rupees, we are now at 85.7 already and falling. So what this does that you have to see over a period of time is that your purchasing power versus the rest of the world is going down. So if you want to travel, if you want to send your kid for studies abroad, if you want to import goods for your business, everything becomes more and more expensive.

And we have a huge import bill in terms of importing oil. So each time our currency takes a hit, we basically are in for a deeper cut into our pockets for getting those goods in. Yes, some exporters will get benefited, but more or less common people, largely the public and, you know, the general citizens of this country, are not going to benefit by a falling currency. But now this has been a trend for the last, whatever, 70 years. So, you know, unless we go from a deficit budget to a surplus budget and we’re able to show our competitiveness and, you know, curb our energy needs in terms of imports, this is not going away.

So 3 to 5% kind of depreciation per year has been the norm. And it is still almost continuing there. Sometimes 2 to 3%, sometimes 4 to 5%. And that has been the norm. So you are losing on that ground on a continuous basis by having your assets in INR rupees. And there’s only one or two, you know, avenues where you can really, you know, unshackle yourself from this. One is, of course, to invest in overseas assets. You buy overseas stocks, maybe real estate or something outside, which is not so easy, both of them. And then the other way is to simply buy gold.

What gold does, and this is a very classic chart of INR Gold versus Nifty of the last 25-odd years, you can see both have given the similar kind of returns. Nobody wants to believe this, but this is the actual outcome. Yes, there will be periods where Nifty will do really well, and then there will also be periods when gold will do very well. Right versus Nifty. So for instance, periods of crisis like COVID, gold will do very well, and Nifty will not do well. You know, 2008 GFC crisis, Nifty cracked, gold went up.

So they are sort of a very good correlation to each other, inverse correlation to each other. So having both in your portfolio is really good. They’re not competing against each other, but they are, you know, like the best friends that you should have in your portfolio. So have both. What gold does is that it’s an asset that you’re buying in rupees, but it is priced internationally. So even if the rupee goes to 90 rupees, 100 rupees in the next few years, you are at least protecting yourself in terms of that value.

Your value of gold will go up in rupee terms, and you will be able to buy the same overseas asset or service or travel what you could do five years earlier because your asset is able to match the losses in INR as well as its inherent gain as an asset class. So this is very important. Of course, stocks will also do that. So as more and more depreciation happens or if faster depreciation happens, stocks will also go in an exponential curve. That is also for sure. So real estate will do that.

So any asset class basically will try to cover up for the local inflation or the depreciation of your asset. Gold in all major currencies, if you see this, is the last 24 years of record in all currencies—whether it is US Dollar, Euro, Great Britain Pound, Australian Dollar, Canadian Dollar, Chinese Yuan, Japanese Yen, Swiss Franc, INR—in all these currencies, you can see the CAGR is 9 to 12% on average. 9.6%, but in Indian Rupees, 12.3% CAGR in the last 24 years. What else do you want?

Which is also giving you a hedge to your major INR assets. So this is a—it’s like a God-given asset class which people are waking up to now, but I think the best time to buy it was yesterday, and the next best time is tomorrow. So, you know, have this asset class in your portfolio. Keep it as a hedge. You can start small but build it up over a period of time, and you’ll find that it will give you a very, very nice equity curve for your combined portfolio going forward.

WeekendInvesting launches – PortfolioMomentum Report