The proverbial oot Pahar Kainicheana happened today, where the US has sheepishly agreed to not trouble China on tariffs much. At least that’s what the current narrative is, now that Trump is saying, “you know, we’ll be nice to China and we’ll have a deal with China.” I believe the yields at 4.9% have caused them to lose their earlier ego and realize that their own markets are getting thrashed while other markets are going up. So perhaps some sense is coming back to the White House. Not sure how long it will last, but this is good news for overall global markets and the stability of the global financial system.
Gold, of course, sold off brutally from $3,500 down to below $3,300 in a flash. The kind of one-way move we have seen in gold was a normal reaction to this shift. I don’t think the gold rally is over. I believe it will consolidate and then start again because these global events are not on-and-off events. Today Trump says one thing; tomorrow he says another. While those switches may fluctuate, countries are now looking at the US in a very different light, and investments in US dollars and Treasuries are being re-evaluated, which could have long-term repercussions on global liquidity and safe-haven assets.
These two months may have changed everything for the next many years or decades, even though it may seem like tariffs were just put on and then removed again. Everything has changed.
Now, let’s look at what happened locally. Is a dollar crash coming? Will the market soar?
This is the topic of discussion today, and we will dive into history to uncover fascinating facts about the US dollar, how it moves, and how it impacts global markets. This is truly a great lesson in economic history.
Where is the market headed?
Market Overview
Nifty was up 0.67% despite a lack of India-specific positive news. We are clearly overstretched in the short term and looking for some consolidation, but the market hasn’t stopped yet. It clocked 24,300, and nobody’s complaining. It’s a fantastic move.
Nifty Next 50
Nifty Junior rose 0.69%, nearing 66,000.
Nifty Mid and Small Cap
Midcaps were up nearly a percent (0.98%), hitting 20,200 with a relentless rise—10th day of gains from the bottom. Small caps were not as strong, up only 0.28%. These segments are overstretched and need consolidation before the next move.
Bank Nifty
Bank Nifty was down 0.5%, finally pulling back after a dramatic rise from 49,000 to 56,000. A retest of the breakout point may be in order.
GOLD
Gold corrected 1.32%. I think gold could come off substantially, and in Indian Rupee terms, we might see prices correct to somewhere between ₹90,000–₹92,000 per 10 grams. However, these should be viewed as corrections in a bull market, not a top. A fall back to ₹60,000 is probably off the table.
Advance Decline Ratio
The advance-decline ratio was 23-4-305 advances versus 195 declines, very much like yesterday. No major change there.
Heat Maps
HDFC Bank led private banks downward, while State Bank of India pulled public sector banks down. Overall, banking was under pressure, probably due to profit booking after solid gains over the last nine sessions.
Sectoral Overview
Sectoral trends show that IT stocks ruled the day, gaining 4.3% today. Over the last week, the IT sector is up 6.4%, although still down 4% over the last month. In the past year, IT has only gained 5%, showing a potential comeback. But overall, the trend is not yet positive; it’s in a downward phase that is showing some promise now.
Sectors of the Day
Nifty IT Index
IT stocks had a great day:
TCS rose 3%, Infosys 3.5%, HCL Tech nearly 8%, Wipro 4%, and Tech Mahindra 4.5%. There’s clearly a relief rally or U-turn in IT as the US begins to soften its stance in the narrative.
Bharti Airtel was up 1.5%, Tata Motors surged 4.6%, Mahindra & Mahindra gained 3.5%, and Sun Pharma rose 2.3%. Others in the Nifty Next were range-bound, but Dmart, Torrent Pharma, Lodha, Godrej CP, Britannia, and TVS Motor did well.
There is buzz about Harley Davidson duties going to zero, but Indian two-wheeler companies like Hero or Eicher don’t compete in that segment, so there’s no damage expected on that front.
Story of the Day : The dollar and how markets may react.
The Dollar Index—a measure of the dollar against a basket of global currencies—has dropped from nearly 110 to 99 in 2025, a 10% decline. Historically, there are phases where the dollar index has fallen significantly.
Phase one (1985 to 1992): The dollar index fell 50% in 7.5 years, from nearly 160 to 80. The Plaza Accord of 1985 saw G5 nations agree to weaken the overvalued dollar through coordinated Forex interventions. This was to keep US exports competitive. This situation aligns with Triffin’s Paradox, where the reserve currency status hurts the issuing country due to the need to constantly supply currency for global trade.
Back then, the US convinced G5 nations to devalue the dollar. Today, that kind of geopolitical coordination is unthinkable, given today’s fractured global politics.
During this period, India’s markets soared. The Sensex went from 300 to 3000, a 10x or 1000% increase, delivering a CAGR of 37%. Gold in INR terms went from ₹135 to around ₹300–400 per 10 grams, with a CAGR of 13.3%.
Equity outperformed gold massively. In dollar terms, Sensex returned 416% (24% CAGR) while S&P 500 only delivered 13% CAGR. Emerging markets like India clearly outperformed dramatically when the dollar was weak.
Phase two (2002 to 2008): The dollar index fell 40% in six years. This was due to long-term US imbalances and deficits. As confidence in the dollar dropped, capital flowed into emerging markets and commodities. We saw an oil rally from under $20 to $120, a 6x jump.
During this period, the Sensex returned 380% (29% CAGR). Gold rose 162% (17% CAGR). Again, equities outperformed gold. In dollar terms, Sensex delivered a 32% CAGR, while S&P 500 only did 2.5% CAGR.
The MSCI Emerging Markets Index gained 344%, while the S&P 500 rose only 60%.
So how does India benefit when the dollar weakens?
When the dollar is weak, foreign inflows to India rise. Investors rotate to emerging markets, boosting equity and bond markets, and strengthening the rupee. Import costs fall, especially for crude, metals, and electronics.
Dollar-denominated debt becomes easier to repay, providing debt relief. There’s a macro boost—lower inflation, reduced current account deficits, and improved fiscal stability.
Export sectors benefit from higher global demand and rising commodity prices. IT, pharma, metals, and agriculture thrive. Additionally, India’s valuation multiples improve, leading to MSCI weight upgrades and other benefits.
Are we in phase three now?
We’ve seen two big dollar-down phases. Could 2023–2025 mark the start of a third phase? These phases last 5 to 7 years. If the dollar weakens significantly, emerging markets like India may again outperform, just as they did in earlier cycles.
Will oil go through the roof? Will gold surge again? Will the rupee strengthen? These are questions only time can answer.
But if history has any lessons, it tells us that whenever the dollar index goes down, India performs extremely well.
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