Where is the market headed?
There is a strong rumor circulating in the market right now that the Indo-US trade deal is on, with tariff rates potentially being cut from 50% to 15%. This news could be released at any moment, as per the grapevine, though we’ve certainly heard these rumors many times before. Let’s hope this time it’s real.
The market received a sense of relief and a boost following the brilliant results released by Nvidia last night. As the largest company on the planet with a $5 trillion market cap, Nvidia’s performance has significant repercussions across the entire technology and AI space in the US, and for general market sentiment globally. The company not only beat expectations with around $50 billion in revenues but also reported 60% growth on that massive revenue size and provided great guidance for the next year.
The worry that had been hanging over the market—that the AI sector might tank if key results were poor, potentially dragging down US and global markets—seems to have been decisively smashed.
Market Overview
The Nifty chart shows the index up and running, gaining 0.54% for the day. Since the highest Nifty has ever reached is near 26,300, we are now just a stone’s throw away from the all-time high. We might go and touch that level and then perhaps enter a phase of consolidation, as we’ve had a reasonable run-up from 25,300 to 26,200, and the rest of the market isn’t yet in tune with this high-level excitement.
Nifty Next 50
This lack of broad participation is evident in other indices: Nifty Junior showed zero excitement, down 0.1%.
Nifty Mid and Small Cap
Midcaps were also flat, down 0.04%. Small caps were actually down 0.1% and have been declining for the last three sessions. In fact, the small-cap chart looks very precarious, resembling a flag pattern. If this trend line breaks down, the index could go much lower. This suggests that the current enthusiasm in the large-cap space seems to be driven only by Nifty players and those intent on pushing the Nifty to a new high very soon.
Bank Nifty
The Bank Nifty has been a strong support, leading the charge and hitting a new record high again today with a 0.22% gain. Since Bank Nifty often leads the market’s direction, its new high supports the confidence that the Nifty may also reach new highs, even if the broader market takes time to catch up.
GOLD
In commodities, Gold was absolutely flat, down 0.02%, and Silver was flattish, down 0.34%.
SILVER
Advance Decline Ratio
The Advance Decline Ratio brought some not-so-good news. The market started the morning well, perhaps anticipating an all-time high today, but as the day progressed, advances faded and declines gained. However, by the end of the day, the number of advances and declines was still quite even.
Heat Maps
Heavyweights like HDFC Bank, Reliance, and Bajaj Finance drove the market up. Bajaj Finserv, Jio Financial, Shriram Finance, SBI Life, Axis Bank, and ITC were among the other gainers. TVS Motors did well, up 3.32%. Stocks that saw some selling included Asian Paints (down 1%), HCL Tech, Infosys, Kotak Bank, and Titan.
In the Nifty Next 50 space, ABB and Mazdock performed well, along with Chola Finance, DMart, LTIM, Pidilite, Solar Industries. Conversely, there was profit booking in PNB, Bank of Baroda, Canara Bank, LIC, DLF, Adani Green Energy, JSW Steel, Hindustan Zinc, Godrej Consumer Products, and Britannia Industries.
Mover Of The Day
The Mover of the Day was JP Power for the second day running, likely triggered by the impending Adani takeover of Jaiprakash Associates. The stock jumped from ₹18 to ₹22, demonstrating the impact of the news.
Sectoral Overview
Sectoral Trends were mixed. Nifty Media crashed hard, down 1.5%, and PSU Banks saw some profit booking, down 0.9%. There were no other major losers. On the gaining side, Oil & Gas, Defense, Infrastructure, and Tourism saw some gains. The Nifty Financial Services sector gained the most at 0.79%, continuing the banking space’s momentum toward new highs. This sector is up 1.29% over the last month and 1.7% over the last week.
Sector of the Day
Nifty Media Index
The chart for the Media sector clearly shows a continuous downtrend since July. Looking at this chart makes it clear why an investor should avoid buying media right now. This illustrates a critical point: avoid the biggest mistake of trying to pick the bottom.
While you might get it right once or twice, more often than not, you’ll get stuck. Always move into a stock that is moving in the direction you want to trade—if you’re buying, look for stocks that are clearly moving up and making new highs. A rising stock tells you it wants to go higher; its intent is clear. It’s like boarding a bus: you only board the bus that is heading towards your destination. This foundational principle should guide your market approach.
U.S. Market
The US markets delivered a very good outcome in the previous session: S&P 500 up 0.4%, NASDAQ up 0.6%, and Dow Jones up 0.1%. The crucial impact will be seen tonight in how the entire market reacts to Nvidia’s results.
Broadcom, Lowe’s, Intuitive Surgical, Alphabet, and Nvidia were all up, although Nvidia’s gain wasn’t as large as expected, perhaps because it had already corrected—tonight might see a bigger move. The disclaimer states that some of these stocks could be part of the Weekend Investing U.S. stock strategy, but they are not recommendations to buy or sell.
Tweet Of The Day
The Tweet of the Day presented two charts comparing the Nifty and the Microcap Index 250. While the Nifty has fully recovered and is likely to challenge its previous high made in September 2024, the Microcaps actually hit a new high later in December 2024 but have since fallen off the trend, down 20-25% on the index level.
This highlights that the market is currently not moving in unison. If the Nifty successfully moves to a new high and maintains momentum, it may eventually pull the mid-cap, small-cap, and micro-cap indices along, but right now, the broader market looks nothing like the Nifty.
Another tweet from Charlie Bilelo discussed leveraged ETFs. For those unfamiliar, leveraged ETFs are products (not available in India, but common in the US) that offer a multiple, like 3x or 5x, of the underlying index’s performance. For example, a 3x leveraged Nifty ETF would rise 3% if Nifty rises 1%, but it would also fall 30% if Nifty falls 10%. They allow retail investors to gain leveraged exposure without dealing with futures or margins.
The US market is a master at creating such financial products, including inverse ETFs (which gain when the underlying falls), and are now pushing for 5x leveraged products on stocks like AMD, Amazon, and Google.
However, these products are extremely risky. A 5% market drop could cause a 5x ETF to drop 25% (or more, due to inefficiencies). This is evident in the 3x MicroStrategy ETF, which is down 32% recently and a staggering 99% over the last year, despite the underlying Bitcoin going up. These products cater to those who view the markets as a gambling den and seek instant gratification.
The grim reality is that most people who trade these products will never make any money. If one wants to play the casino, it is suggested they might as well go to a real casino and have some fun there.
