The markets have continued their mode of consolidation over the past few days. While the last couple of days have been relatively dull, it’s important to note that March overall has been fantastic for the markets. The markets across the board have performed really well, and a brief pause after such a strong rally is completely normal—nothing major to worry about.

In the US, the markets have seen positive movement in the last few sessions, supported by hopes of lower tariffs. The much-anticipated tariff announcements are expected next week, so all eyes will be on that. It’s possible that the market consolidation we’re seeing right now is partly due to jitters around this event.

On a positive note, foreign institutional investor (FII) inflows into Indian markets have turned positive after a long period of negativity. The last five to six sessions have seen extremely robust inflows, which bodes well for the market. Additionally, there’s strong chatter about improving economic conditions in the country. With that in mind, let’s see how March ends and how this financial year wraps up. Hopefully, the months ahead will continue to show positive momentum.

The main topic for today will be “You won’t repeat this mistake after watching this.” What mistake are we talking about? Why do people keep falling into the same trap over and over again? And what data can help you avoid making this mistake?

Where is the market headed?

Market Overview

Today, Nifty 50 is down by 0.77%. We’ve been tracking this trend line, and after breaking away from it, Nifty is looking a bit sluggish. The key point to note here is that this resistance has not been broken yet. There was a brief moment on Tuesday where Nifty broke above the resistance, sparking hopes of a continued rally. However, the market has encountered selling pressure at each of these critical points, suggesting more consolidation could be in store.

Nifty Next 50

Similarly, Nifty Junior was down by 0.39%, reflecting a bearish engulfing pattern from yesterday.

Nifty Mid and Small Cap

The mid-cap segment also faced a decline of 0.63%, likely coming back to retest the 40-day moving average. Small caps, in particular, took the hardest hit, down 1.41%. We saw a similar scenario where small caps briefly broke above the 15,000 mark but have now retreated.

Nifty Bank Overview

The Bank Nifty was also down 0.77%. I had hoped Bank Nifty would come and retest the 53,000 mark, but we’ve seen pressure from sellers before reaching that zone.

GOLD

Despite the market’s weakness, gold has shown positive movement. After breaking through a key resistance level around 8,750, gold has seen a reasonable uptick over the last few days, with a retest of this level.

Advance Decline Ratio

Today’s market breadth shows a clear trend of declining stocks. Out of 112 advances, there were 388 declines, continuing the downward trend we’ve seen since March 18th.

Heat Maps

Notably, the banking sector took a beating today, with stocks like SBI, Bajaj Finance, and Kotak Bank losing quite a bit. The defense sector, however, stood out with positive performance, and so did a few MNCs.

Sectoral Overview

In the sectoral analysis, defense stocks and MNCs were the only two sectors to return positive gains today. On a weekly and monthly basis, defense has been the top-performing index, with solid returns. In contrast, most other sectors were in the red today, including metals, media, and financials.

Sectors of the Day

Nifty IND Defence Index

Story of the Day – The common mistake that investors make repeatedly

We recently received a question from a viewer during our “Ask Weekend Investing” episode. The user mentioned that they often fall into the trap of chasing mid-cap and small-cap stocks during bull markets, only to realize that they can’t handle the volatility during corrections. This cycle repeats itself with every market rally.

Firstly, we commend the viewer for recognizing the issue—self-awareness is the first step toward solving any problem. This is a very common problem faced by investors of all experience levels, even seasoned investors. Here’s why: during bull markets, small caps tend to outperform large caps and mid-caps, sparking a sense of FOMO (fear of missing out). Investors who are holding large-cap stocks may feel the urge to switch to small caps when they see these stocks outperforming.

However, this strategy often backfires during market corrections, where small-cap stocks can be significantly more volatile. As a result, many investors panic and move back to large-cap stocks or liquidate their small-cap investments at a loss. This cycle repeats itself, causing frustration and poor returns over time.

So, how do you break free from this cycle? A simple, diversified asset allocation strategy can help.

The Power of Diversification

Let’s walk through a simple strategy that can prevent you from making this mistake. We compared different asset allocation models using data from the last 20 years, focusing on large-cap, mid-cap, small-cap, and gold.

Here’s the basic strategy:

• Combination 1: 1/3 of your money in large caps, 1/3 in mid caps, and 1/3 in small caps.
• Combination 2: 25% each in large caps, mid caps, small caps, and gold.

We used data from four periods: 2005-2010, 2010-2015, 2015-2020, and 2020-2025. Across these periods, the combination of 1/3 in each segment consistently outperformed individual segments, showing that a diversified approach works well in the long run.

For example, between 2005 and 2010, the 1/3 allocation strategy delivered 159% returns, closely followed by gold with 154% returns. The large-cap index gave 16.7% annualized returns, but the combination strategy provided better stability and higher returns than simply betting on one segment.

Key Takeaways

1. Asset Allocation Over Timing: The main takeaway is that simple diversification works better than trying to time your entry into specific market cap segments.
2. Gold as a Hedge: Gold has outperformed large-cap and small-cap stocks in certain periods, especially during market downturns. Adding gold to your portfolio can reduce volatility and protect your investments during corrections.
3. Consistency Over FOMO: Rather than chasing market trends and jumping between market cap segments, stick to a simple allocation strategy that balances your risk.
4. Avoid Overthinking: A simple, systematic approach can often yield better results than trying to predict short-term market movements.

To wrap up, don’t waste your time trying to time the market. Focus on a diversified asset allocation that suits your risk profile, and avoid the temptation to chase hot sectors during bull markets. This approach can lead to smoother, more consistent returns over time.

Conclusion

To end with a quote: “Putting all your money in one market cap segment is like loading all your toppings on one single slice of pizza. It can come across as a bold move, but it’s unlikely to taste good in the long run.” Adding some gold to your portfolio provides stability and seasoning that will pay off in the long run.

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