There is no change in the markets today, and rather, another sell-off. Small caps are losing it big, and large caps are also down, losing some ground. Unfortunately, there is still no relief. The relief rallies we keep getting every now and then are just that—relief rallies—and we are yet to make a bottom, even on an intermediate basis.

I was looking for a two-day high on the Nifty today, and it almost looked like it was going to happen until midday, but then it gave everything back down. So, the recovery remains elusive. As we end the week, we’re less than five days away from the budget, and the market is not reflecting any optimism at all. There’s no hope in sight. Despite the government announcing that, at least according to sources, there won’t be any changes to the capital gains tax, and there may be tax slab cuts or expansion of the tax slabs to reduce the effective tax rate for the middle class, nothing is making a difference. Good results are getting hammered, and the stocks are following suit.

The market is in a mood to go down, and right now, nothing seems capable of stopping it. However, I would say that having witnessed so many of these cycles over the past 30 years, since 1994, I can tell you this: every time the market hits a bottom, the narrative is very negative. There will be no optimism, no one will be calling for a buy on the market, and that’s usually when the bottom is made.

We will never know when the bottom is going to hit. It’s always unpredictable. The bottoms typically come when nobody expects it. Whether it happens today or a year later, no one can say. But typically, the bottom is formed during some kind of event that triggers panic. If you remember, in June 2024, after the election outcome, there was a flash crash, and that moment marked the bottom for the next six months. We’re still above that point now. So we’re probably waiting for a similar kind of move, where the last bunch of people who need to capitulate finally throw in the towel, and that’s when the market could rise from there.

We’re just waiting for that moment. It could have happened today, or it might not happen for the next six weeks or six months. Nobody knows.

We will talk about gold today. Keep ignoring gold at your own risk. In this discussion, we will provide a global perspective on gold in different currencies, showing how people in various regions have used gold not just to hedge equity risks, but also to create and sustain wealth over time. Unfortunately, gold is an asset class that lacks strong cheerleaders.

The narrative that’s been set is that gold is outdated—a relic of the past you shouldn’t own. But in the second half of this blog, we’re going to dismantle that mindset and show you why this belief is not only misguided, but also potentially harmful to your portfolio’s long-term health.

Where is the market headed?

Market Overview

The Nifty, especially, is still in its third consecutive inside day following this long bar we’ve had. Thankfully, it hasn’t broken the bottom of that range yet. On a weekly basis, things don’t look so bad either, as the last two weeks have been hovering around the same level. However, there’s still no confirmation of any upside momentum. We did make an attempt to move higher today, but it ultimately failed. As of now, the market is down about half a percent, but I wouldn’t read too much into this decline just yet.

Nifty Next 50

Where the damage was more was in Nifty Junior 1 1/2% down and looks like, you know, it wants to go lower.

Nifty Mid and Small Cap

The Nifty mid-caps are down by 1.69%, also looking weak, while small caps have actually hit a new recent low, down by 2.15%. This indicates that there is definitely more pressure in the second half of the market, particularly in the smaller mid-caps, small caps, and the micro and nano-cap stocks. So, this is where the markets currently stand.

Nifty Bank Overview

The Bank Nifty is also within the range of the last couple of days, so there hasn’t been much of an impact there. It’s down by half a percent on the day.

Advanced Declined Ratio Trends

Looking at the Nifty momentum advanced-decline trends, there were hardly any advances—only 66 out of the top 500 stocks. The market was extremely skewed towards declines.

Nifty Heatmap

Within the heat maps, there were very few spaces of green. Ashok Leyland was looking good, and Hindustan Unilever saw a reactionary bounce of about 2%. Britannia was up 1.77%, and ITC and Nestle were mostly flat. FMCG, as a whole, was flat, and so were most of the stocks in that sector. However, there was significant damage in pharma, with Dr. Reddy’s and Cipla both falling sharply. Retail trade, consumer durables, and autos were all down, as was the entire energy pack, including Reliance and ONGC. HDFC Bank also contributed to pushing the market down, with a 0.91% decline.

In the Nifty Next 50, only a few stocks like Lodha, Tata Power, Ambuja Cement, Indigo, and Varun Beverages managed to stay in the green, while the rest of the list was entirely red. Siemens, ABB, Havel’s, Bhel, Zomato, Pidilite, Jio, DLF, PFC—everything here was down big. So, there was no relief from the Nifty Next 50 either.

Sectoral Overview

Within the sectors, real estate continued its downside, down 2.3% today and now 9% down for the week. Real estate is one sector that seems to have been picked to get hammered, with nearly 21% lost in the last month alone—things are really looking ugly in that space. Pharma, which was relatively stable until yesterday, has also taken a hit, losing 2.1%. The energy sector is losing quite a bit as well, now down 16.7%, making it the top losing sector over the last three months. The renewable energy space has been hit especially hard, with both newer listings like VARI and older ones like SW Solar losing significant ground.

Autos are down 1.5%, and both public sector enterprises and PSU banks are each down by about 1.5%. Metals and commodities have also taken a hit, each down by 0.9%. There’s really no place to hide in the market right now. On the defensive side, FMCG and IT have provided some support.

Sectors of the Day

Nifty FMCG Index

However, the gains in FMCG are minor, with only 0.4% and 0.5% gains in the sector. Companies like Hindustan Unilever, Britannia, P&G, Tata Consumer, and Colgate have managed small gains, but any green right now is welcome. If FMCG can manage to break past its recent highs, only then can we confidently say that it’s truly crossed to the other side.

Story of the Day : Keep ignoring gold at your own risk

The goal of this discussion is to counter all the myths and misconceptions about gold that still circulate today. Recently, I had a Twitter conversation with a leading name who suggested that gold has given virtually nothing compared to equities. Some charts I shared, however, clearly debunked that thought process. Many equity investors have this ingrained belief that gold is useless, but the reality is that gold is nearing all-time highs in US dollar terms.

From around $1,645, we’ve seen a continuous leg upward since 2022, and over the past two and a half years, gold has climbed from roughly $1,600 to $2,773—a substantial gain of about $1,100, or roughly 70-75%. If we look at the past 12 months, the performance is even more telling. In US dollar terms, gold has outperformed the S&P 500 index—36% versus 25%—despite the latter being the best performing market globally. Even though money has been rushing to US markets and the S&P 500 is at its highest valuation ever, gold has still been a stronger performer in this period. In Indian rupee terms, gold is up nearly 42%, while the Nifty has only gained about 8%.

The comparison becomes even more striking when you look at how gold has performed relative to the Nifty. As soon as the Nifty began to fall in October, gold kept rising. So, gold has been rising both when the Nifty is rising and when it is falling. This is the kind of hedge every investor needs in their portfolio.

Let’s delve deeper and look at the performance of gold in major currencies over the last 25 years. In the US, gold has delivered a 9.6% compound annual growth rate (CAGR), while the S&P 500 has only managed 6.1%. Adding in dividends, the S&P 500 might bring it up to 7%, but the gap remains clear. For the past 25 years, gold has been a more reliable performer for long-term wealth preservation, especially when you consider the ups and downs of the equity markets.

Looking at Europe, the picture is even more evident. While equities in Europe have given only about 12% returns over the last 25 years, gold has outperformed with a 9% CAGR. Countries like Germany, Italy, Spain, and Poland are flocking to buy gold because they’ve seen how it has fared against their fiat currencies. Similarly, in the UK, where the FTSE 100 has delivered only a 1.3% CAGR over the past 25 years, gold has shown a much stronger performance at 10.5%.

In Australia, the S&P ASX 200 showed a CAGR of only 4.1%, while gold in Australian dollars performed better with a 9.6% CAGR. In Canada, the TSX index grew by 5.9%, while gold showed a 10.1% CAGR in Canadian dollars. The trend is similar across other global markets, whether in China, Japan, or even India, where gold has outperformed the equity markets in terms of hedging risks and providing stability.

Let’s now focus on India. From the year 2000 till now, gold has returned 12.6% CAGR in INR terms, compared to 11.4% for the Nifty. But again, the crucial point here is that whenever the Nifty falls, gold tends to rise. This creates the perfect hedge for your portfolio—gold works when equities fall, cushioning the dips and supporting your overall portfolio’s health.

Despite all the data presented here, it’s important to remember that gold isn’t competing for equity returns. Instead, it serves a different role in your portfolio—acting as a hedge, preserving wealth, and providing stability. Unfortunately, the narrative around gold being “useless” is often pushed by those who are more interested in selling equity products rather than ensuring the financial health of investors.

I have no vested interest in promoting gold for personal gain; I simply want to ensure that people understand the true role of gold in portfolio construction. It’s not about beating equity returns but about being a reliable, limited asset in your portfolio. Gold is an excellent hedge against inflation, currency devaluation, and economic uncertainty. Central banks continue to accumulate gold because it holds intrinsic value that doesn’t rely on the printing press, unlike fiat currencies.

If you haven’t yet allocated a portion of your portfolio to gold, I urge you to at least consider it. It may change the trajectory of your financial future, especially during times of market distress. Gold offers a hedge against your own country’s economic and currency risks, and in extreme cases, it can even provide security in times of political instability.

So, how much gold do you have in your portfolio? Has this discussion persuaded you to increase your allocation, or to finally consider adding gold to your holdings? Let me know in the comments. If you haven’t considered gold yet, or if your allocation is poor, I recommend making a move to improve that.

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