Where is the market headed?

This week is turning out to be a particularly dull start to the month, marking the third consecutive day where the market seems absolutely confused about its direction. One day, a specific segment moves up, and then the next day, a different segment moves down – a complete chaos in terms of market direction. However, considering we are currently sitting at a reasonably elevated level, merely maintaining this position is actually quite good.

We believe that clearer cues for the market’s trajectory might start to emerge from the upcoming quarterly results. These results are perhaps slated to begin around the 15th of July, and given that we’ve had a couple of down quarters recently, the comparative quarterly results might start to look promising. Beyond domestic factors, there’s another significant piece of news circulating in global markets: rumors suggest a surprise rate cut by the Federal Reserve in July itself, and there’s considerable buzz about this. Furthermore, another rumor floating around concerns the BRICS meeting scheduled for next week, from which some important announcements may also emerge. We will certainly stay tuned for all these developments.

Market Overview

The Nifty, after two dull sessions, registered a third in a row, closing at minus 0.35%. It’s neither here nor there, and we are still comfortably at 25,450. So, truly, nothing substantial has been lost, and it remains a good level to be at.

Nifty Next 50

Nifty Junior also experienced a significant dip this afternoon but recovered, ending net-net only 0.29% down.

Nifty Mid and Small Cap

Mid-caps showed even greater resilience, down only 0.05%, while small-caps were down by a mere 0.39%. This performance is noteworthy, especially considering it follows an IIP (Index of Industrial Production) number that was not particularly good. This indicates that the markets are taking all weak news in their stride, perhaps suggesting an underlying strength.

Bank Nifty

Nifty Bank was the only sector that saw a significant cut today, down by 0.8%. However, if you examine its chart, it has just recently broken out of a congestion zone.

GOLD

In contrast, gold is on an upward trajectory for the third day running, now priced at 9759 per gram. There’s a strong sense that gold has completed its consolidation phase and is now poised for a new leg up.

Advance Decline Ratio

Analyzing the advance-decline trends, advances dipped very hard in the first hour but then largely remained stable for the rest of the day, with only a slight hike towards the end. The ratio, 207 advances to 292 declines, is not bad at all. This three-day subdued period might very well set up a base for gains over the next few days.

Heat Maps

Today’s market exhibited a very polarized nature. Banks, NBFCs, and financial services, across the board, were down. Conversely, metals and cement sectors were up. Within the Nifty space, we observed sporadic winners like Asian Paints, Hindustan Unilever, Bharti Airtel, and Wipro, while Reliance was down.

In the Nifty Next 50 space, Hyundai declined by 5%, and Swiggy was down 3%, indicating that some of these newer listings are once again facing selling pressure. Torrent Pharma also saw a decline, while Chola Finance, Bank of Baroda, PFC, REC, and Canara Bank experienced profit booking. Cement and Steel continued their upward trend, with Ambuja Cement and Jindal Steel both moving up. DLF and LIC also lost ground, as did HDFC and HDB Financial Services, with the latter having listed today, getting that overhang out of the way.

Sectoral Overview

The most significant trend move today was clearly in metals, which surged 1.4% in the metal space and 0.6% in the broader commodity space, likely influenced by Chinese sectors today. In contrast, Real Estate saw a downturn of minus 1.4%. As mentioned, financial services were down 0.97%, and Capital Markets also fell by 0.9%. PSU banks, Nifty Bank, and Central Public sector enterprises were all down, with other sectors experiencing losses between 0.5% and 0.9%.

Sector of the Day

Nifty Realty Index

In the real estate space, losses were observed in Anant Raj, DLF, Godrej, Oberoi, and Sobha. Real estate has been on a downward slide since the second week of June, also retreating from its recent highs.

Nifty Metal Index

Notable gainers included Tata Steel (up 3.7%), SAIL, JSW, Welspun, and Jindal Steel, all contributing to the metals sector’s 1.41% rise, bringing it nearly to its current year high.

Story of the Day: 3 Habits That Can Severely Damage Your Financial Future

The first habit that causes significant issues is SEEKING VALIDATION – constantly asking others, “Have I made the right decision?” after investing. This is a very common problem because a substantial number of people buy or sell stocks based on hearsay, media recommendations, or articles, rather than an in-depth study or a decision derived from a systematic approach.

If five of your friends claim they are buying Stock X, you might feel compelled to buy it too. Then, once you’ve bought it, most of the time the stock will start to decline, and you’ll find yourself seeking validation again, hoping for confirmation that your decision was correct and you should hold on. When this cycle repeats, it gradually weakens your judgment and undermines your confidence, making you feel like you continue to make silly decisions by listening to others.

It might surprise you, but having been in the market for 30 years, I’ve met many people, some with 15-20 years of experience, who still haven’t broken free from this stranglehold of being attracted to ad-hoc advice from commentators, acquaintances, or confident talkers at parties. You might meet someone who confidently asserts insider information about a company’s sales, leading you to act, but more often than not, it doesn’t pan out. It’s crucial to do your homework before investing, whether you’re into fundamental, momentum, or any other type of investing. Your decision-making process should precede any validation-seeking.

Social media and WhatsApp groups are rife with buying decisions based on tips and hype, with Telegram and WhatsApp being full of such recommendations. The best way to avoid this is to either completely tune out external recommendations and do your own thing, or listen to others but then meticulously conduct your own study before making a call.

Take the Ola IPO as an example (see the image below): it was hugely hyped, creating a “fear of missing out.”

Many people bought it in the second or third week of its listing as it surged from 70 to 150-160 in just 10-12 trading sessions, only for it to collapse, now down by 70%. There was false hype, false hope, and no homework.

When the market corrects, those who bought based on validation will again need external advice on whether to hold, because their initial decision was based on flimsy grounds. This leads to delaying decisions, seeking confirmation bias, trying to find small positives in a failing company, only for further drops to occur, eventually leading to devastating losses of 60%, 70%, or even 80% before investors finally give up.

The second detrimental habit people often fall into is OVERTRADING – the impulse to constantly buy and sell for quick gains. If you buy a stock at 100 and it reaches 105, there’s a fear of losing that profit, so you book it. Conversely, if you buy a stock at 100 and it drops to 95, people often become more confident, thinking it’s now a great buy at a lower price.

This is how the mind often works in reverse. When you’re making money on an investment, it should instill more confidence that you made the right decision at 100, and perhaps you should even buy more as it moves in the right direction. However, the reverse often happens because we somehow equate buying stocks with buying vegetables or fruits – thinking cheaper is better. That’s not how most investing works. While a stock might eventually perform well after a five-year lull, you are effectively playing against the prevailing trend.

It’s crucial to be very clear whether you are playing with or against the trend. Moreover, every transaction involves brokerages, taxes, and a significant emotional overload. Excessive, unnecessary trading burdens your mind with numerous transactions. Numerous studies have shown that very frequent traders consistently underperform less frequent traders. For instance, someone making 20 trades a month, with an average brokerage plus STT of perhaps half a percent or so, managing a 10 lakh portfolio, could lose about 12% of their capital in a single year just from transaction costs.

In contrast, an investor making only two trades a year incurs virtually negligible costs. Therefore, being conscious about transaction costs in your trading or investing is paramount.

The third poor habit is LIFESTYLE INFLATION, a phenomenon that impacts more than 99.99% of people. As incomes rise, wealth increases, and a general sense of well-being grows (perhaps from a salary hike or a Diwali bonus), we tend to splurge. This manifests as new iPhones, upgrading from Ola auto to Ola Prime, moving to larger apartments, or buying newer, bigger cars. The inherent danger here is that these upgrades quickly become the new normal, making it incredibly difficult to revert.

If the next Diwali bonus doesn’t materialize or the next increment doesn’t come, you find yourself locked into a higher expense platform. This isn’t exclusive to those earning less; many celebrities and wealthy individuals go broke precisely because they create unsustainable lifestyle inflation. At every level, once you enter this game, you feel pressured to ascend to the next level to demonstrate your perceived growth in life. If this is merely a show to others, and your income or savings aren’t growing at the same pace, or if inflation surges, just sustaining this lifestyle becomes a struggle.

You often hear stories of rock stars, film stars, or baseball players selling their houses due to this. While less common in India due to a generally conservative mindset regarding affordability, this trend is becoming more commonplace with the new generation, particularly Gen Z. Many high earners live paycheck-to-paycheck; when a salary jumps from 50,000 to 75,000, instead of investing that extra 25,000 or a portion of it, they opt for a better house or dining out more frequently, often taking on new EMIs. This leaves little to no additional savings. Therefore, being very conscious about income allocation is vital.

Blowing away any increase in your income is arguably the worst habit you can adopt. Your priority should be to invest at least some part of your raise or bonus, deciding on a specific percentage—be it 20%, 30%, or 50%—and sticking to it. Even with your regular income, aim to save a portion (10%, 20%, 30%) first, letting the rest be the variable expense.

This approach will fundamentally prevent you from draining your financial future. While instant gratification exists, in the longer term, you will suffer, and this habit can eventually sink your financial boat. You are likely well aware of all this; there’s no real need for me to explicitly state it.

So, what should you do? Begin by identifying one negative habit that you possess. While I’ve highlighted three today, there are many more. Try keeping a journal, either weekly or daily, depending on what suits you best. Sit down and record what you did right and what you did wrong. Then, pinpoint the specific habit that is causing your financial issues and take small, incremental steps to correct it.

This, I believe, is the fundamental way to approach the problem. The compounding rewards will manifest as you begin to take these steps. Conversely, compounding also works in the other direction: those who continue to wait, procrastinate, or delay will find that their suffering continues to compound.

And with that, we come to the end of this blog. Thank you so much for reading. Do like and share these videos with your friends.