Another decent day I would say where the markets did not fall. Nowadays, whenever on any day the market doesn’t fall, it is termed as a good day.

So today we are going to tell you about some statistics about gold. Let me qualify that and we’ll go through some very nice data that will show you how important knowing this data is.

Where is the market headed?

Market Overview

So out of four sessions, three sessions have been green, and one session has recovered from its bottom. So in the last four sessions, the trend has been that post-opening, there is a wave of buying that emerges. This is very different from the trends of the last seven or eight sessions, where on every day after opening, the market would go down. In the last four sessions, that has not happened. Only one day, the market actually went down but recovered almost fully. So the market is trying to at least look like a different character of intraday play in the last four sessions, and that may be the first signal once again that this leg of down move possibly is done. But I’m still waiting for a two-day high close, which has not happened yet. So I’ll wait for that before celebrating the next uptrend.

Nifty Next 50

Nifty Junior, however, gave a very strong up move today again after yesterday’s move, 1.47%. So yesterday we closed above the two-day high and the resulting follow-up on that was seen today.

Nifty Mid and Small Cap

So two sessions and we are up almost 2000 points on the Nifty on the mid caps. Also, very strong move in two sessions, 1.3% again today. So now we have sort of come back to where we broke down from the bottom at the end of January. So good decent climb back on mid caps and small caps also making a 1.2% move, very near the January bottom. So a good pullback in almost all segments except Nifty

Nifty Bank Overview

Bank Nifty is sort of flat, down half a percent today, but very much in the range that it has been at in the last four to five sessions.

GOLD

Gold up another 0.36% today. So we are nearing 8700 again on INR gold. On US dollar gold, we have crossed 2950 and I think 3000 is not too far anymore.

Advanced Declined Ratio Trends

Market breadth is reasonably decent. Not yet so nice on Nifty, it’s still 28:22 on Nifty, but Nifty 500, for instance, is 356 to 142; Nifty Next 50, 41 to 9. So good market breadth, more in favor of the greens than the reds.

Nifty Heatmap

HDFC bank being the biggest sort of overhang on Nifty today. Maybe there are some FIs involved, I think that has happened there. 2.32% down on that. Kotak bank also down 0.7%, ICICI bank down 0.9%. So private banks are feeling the heat. Energy stocks were up. Some of the auto stocks have also been up. Barring Maruti, Energy like ONGC, Coal India were also up, it was reasonably flat.

Serum Finance gained 4%. Nifty Next 50, however, has a lot more green, and finance companies were in the limelight, including public sector banks, finance, and NBFCs. You also had energy stocks, Tata Power, JSW Energy, Gas Authority, NHPC all gaining ground. You had capital goods companies doing well. Then you had even consumption stocks like PD Lite and in Nifty Trent and so on so forth did well. Vedanta, Godrej, CP Indigo, IOC mixed bag but a good mix of green. On Nifty Next 50, financial services, banks, private banks, and the services sector did not go into the green.

Sectoral Overview

Pharma and IT were almost flat. FMCG absolutely flat. But capital markets is what is driving the sectoral map up.

So in one week, out of, I think, it was negative 5%, we’ve come to plus 3.7% and the monthly loss and the three-month loss are also reducing fast. Public sector, backed by, you know, domestic defense stocks on hopes of American exports, have climbed a couple of percentage points in the last few sessions. Metals are up. Energy, as I mentioned, is up too. Banking is up. Tourism, commodities, oil and gas, defense, autos, real estate, all these were going up. So in the last one week, only defense, pharma, and media are particularly down. Otherwise, other sectors are flat or they are going up.

Sectors of the Day

Nifty Capital Market Index

The capital market segment has seen a very nice climb back from the bottom right here, led by BSE, Motilal Oswal, CDSL, Angel1k Fintech, etc.

Story of the Day : Don’t tell me I did not warn you about this.

Here is some data which you should be implementing in your portfolios. So the first thing first, corrections are permanent. Let’s not be disappointed because markets are correcting. First, this needs to get out of our head that our portfolio can go like this always. It cannot happen. This is like breathing. You’re breathing in, breathing out, breathing in, breathing out. The market also works like this in almost like a cyclical fashion. Uptrend, downtrend, uptrend, downtrend.

Yes, we can try to make the best of each part of the cycle, but that cycle will happen whether you like it or not, whether you accept it or not. So the first thing first is that it’s better to accept it, that you know, this is the way of the market. Just like, you know, when you stand on the beach, the waves are coming and going back, coming and going back. You can’t, you know, think that only one-way traffic will happen there. It can’t happen. That’s the nature of the beast there. So this is also similar. You will have uptrends, you will have downtrends. Absorb them like, you know, it is part of life.

Once you train your mind to think like that, you will not feel so bad when you lose 10, 20, 30% also on your portfolio. Because you know that in the whole cycle, I will make a lot of money, and then I will give up something, and then I’ll make a lot of money again. And gradually you are going one step up at a time. So, you know, the journey becomes smoother. It will become peaceful. You will learn to manage yourself, your emotions, and, you know, the biggest aspect of market investing is to control your emotions and to understand that the market is doing what it is supposed to do.

Now we can introduce gold into this entire mix because gold is that ultimate asset class that offers a great hedge to equity. And most importantly, it gives you that peace of mind. Your portfolio could be going 1 to 10, to 5, to 15, to 10, to 20, but when you add gold to it, it will go much smoother and with very little deviations on the way. So that smoother journey will give you peace. Exactly like, you know, when you’re on the highway and you hit unexpected dips or speed bumps on the way, you will curse the Minister of Transport for that. But then, you know, if you have a smoother ride with very little ripples on the way, your peace will not get disturbed. That is exactly what will happen.

So what has happened in the last one year? Last one year, gold in INR terms is up 51%. Small caps are down 3%, large caps are up 2%, 3%. That’s what has happened in the last one year. And there’s so much hoo-ha about this market fall in the last four months. Effectively, if you see on a one-year basis, stocks have not gone anywhere, either the large caps or the small caps, while gold has gone up 51% in the same time period. So nobody was expecting this one year back. If somebody told you that within one year equity will be where it is right now and gold will be at 50% higher, obviously, you would have allocated to gold. But of course, nobody can predict the future.

So we’ll see now on a 10-year CAGR basis, you know, gold versus small and large caps. So we’ll visualize this through data and the question is, is this the beginning of a new cycle of gold outperformance over equity? So, 10-year rolling CAGR of gold is there for the last decade or so. So basically, this point is 10-year returns of gold minus large caps. CNX100 is the large-cap index. So this plotting is 10-year rolling CAGR of gold returns minus CNX100. Wherever it is green, gold has been outperforming on a 10-year rolling CAGR basis. Whenever it is red, equities have been outperforming.

In the last decade and slightly more, you’re finding that there was a small cycle of equities doing well in 2014-15. Then gold actually was doing much better from 2015 till 2018 on a 10-year rolling CAGR. Then 2018 to 2020 equities was basically doing better. Then because of COVID, equities crashed, and gold really went up. So there was a small period where gold was doing well and then there was a huge period where equities outperformed gold. And that is okay. I mean, most of the time you will find that equities should be outperforming gold. That is by design. But then, you know, there will be periods where gold will also sort of outshine while equities take a back seat.

Since 2024, October, we are seeing green here. So gold is now in that cycle of outperformance, whether it lasts, you know, eight months, 10 months, or whether it will last three years, that is not known. But that’s where things are right now. So 38% of the duration, gold is outperforming, and the rest 62%, large caps are performing.

Now, if we do the same comparison versus small caps, so 10-year rolling CAGR of gold minus small caps, you’re seeing here gold outperforms small caps 48% of the time. So here again, you are seeing almost three to four years of gold outperformance. Then you have another year, two years of gold outperformance right here. And now we are just moving into that territory where gold minus small cap 100 is again in the green and gold is outperforming. And this may stay this way for some more time, a few years perhaps.

Now let’s also see the relative performance of gold, gold minus large cap, gold minus small caps across 1, 3, and 5-year rolling CAGR basis as well. That was 10 years. Now we are looking at this. So if we see one year excess of returns, then 45% of times gold is outperforming large caps in the last 20 years. And again, you can see right now we are in that green territory. If we compare one year of gold versus small caps… I’m sorry, this chart is not behaving properly. We are still in the green territory and still at 45% of outperformance by gold.

In the three-year CAGR, you are seeing that 46% of the time gold performs more than large caps. Again, we are in the green territory now. And on three years versus small caps, you can see gold is just about getting into that green space. 49% of the time, 3-year CAGR of gold has been greater than small caps. When we look at five-year excess returns, you’re seeing 45% of the time gold is doing better than large caps. And when we see five years versus small caps, you’re seeing 49% of the time gold is not doing better than small caps. But right now, on a five-year CAGR basis, gold is still underperforming on small caps. That is telling you how much small caps have done well in the last five years despite this current fall, still performing better than gold over the last five-year period.

So the hedge of gold is, you know, is basically, you can say too straightforward. It’s common sense and, you know, it is a big hedge against sovereign stupidity also. So, you know, your country, and I don’t ever, you know, think that India will do anything stupid. But in case we do get, you know, the top supremacy to do some silly things, this is what is going to, you know, hedge you against those actions.

Very recently, DSP had shown in a slide that even in developed markets, gold excess returns over equity markets have been phenomenal in the 21st century. Out of these seven countries, only Australia has been matching the equity returns to gold. Otherwise, gold has beaten by far, you know, returns in all these countries and especially in emerging markets. You see 12.9% gold returns in emerging market vs. 8% of equity returns. So gold is now making a comeback once again.

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