Where is the market headed?
🚀 A Surge of Optimism: Markets Rally on Inflation News
The markets had a very strong day, fueled by a single report from the U.S. indicating that the inflation rate is below expectations. This news immediately sent the anticipation for a potential December rate cut through the roof. Asian markets responded with significant strength and were up in trade, which led to our own market opening much higher than expected for the day.
Suddenly, the glum mood following yesterday’s expiry has completely reversed, pushing the market to a new all-time high, or at least very close to it. The sentiment has swung dramatically from complete pessimism to renewed hope.
Market Overview
Looking at the charts, the Nifty chart showed a single, sharp move of 1.24%, which impressively covered the entire range of the previous four days. This is a powerful move, unlike anything seen recently, where the open of the day was also the low of the day. This is a significant technical aspect: when the day’s open equals its high or low, it suggests the market is very decisive about its starting point and the direction of its trend. Given this, it is now highly likely that the Nifty will head to a new all-time high.
Nifty Next 50
The broader market also performed exceptionally well. Nifty Jr climbed back quite dramatically, up 1.49%, almost recovering the losses from the two steep fall days of the previous week.
Nifty Mid and Small Cap
Mid-caps gained 1.28%, recovering everything lost in the last three or four days, and small caps rose by 1.18%, although they remain further from their all-time highs. Overall, it was a great day for rebuilding confidence.
Bank Nifty
The Nifty Bank actually closed at a new high, up 1.2% for the day, exhibiting the same decisive action where the open equaled the low, with no wick on the candle.
GOLD
Gold was up 0.93%, now trading at 12,664 per gram and is just a stone’s throw away from its previous high in rupee terms. Silver performed even better, surging 1.96%. It is now nearing the 1,60,000 mark again, just a couple of percentage points from previous highs.
SILVER
Advance Decline Ratio
The market breadth was overwhelmingly strong, with the advance-decline trend showing 416 advances to only 84 declines—a completely one-sided day where the decliners stood no chance against the gainers.
Heat Maps
The Nifty heat map was almost entirely green, with Bharti Airtel and Adani Enterprise taking a break, down slightly. The market was led by Reliance (up 1.9%) along with strong gains in HDFC Bank, ICICI Bank, Bajaj Finance, Axis Bank, Kotak Bank, Maruti, TCS, Infosys, Tata Motors, L&T, Indigo, and JSW Steel.
The Nifty Next 50 heat map showed no red whatsoever, with big gains in stocks like Vedanta, Tata Power, Siemens, Mazdock, Bosch, Varun Beverages, HAL, TVS Motors, and BPCL, demonstrating the significant breadth of the strong move.
Mover Of The Day
In the “mover of the day” segment, Natco Pharma jumped 11.2%, continuing an earlier breakout after a three-day correction, moving from 800 to 927 in a short time.
Sectoral Overview
On the sectoral front, all sectors were in the green, with the lowest gain in FMCG at 0.71%. This highlights the depth and breadth of the rally. Metals gained 2%, with capital markets almost at 2%, and commodities and energy, oil and gas, media, and manufacturing all gaining over 1.5%.
It’s rare to see so many sectors gain more than 1% in a single session. Metals have been rallying for the last two sessions, with Lloyds Metals, Sail, JSW Steel, Hind Copper, and Jindal Stainless leading the charge.
Sector of the Day
Nifty Metal Index
U.S. Market
The U.S. Markets also reversed dramatically in the previous session, with the S&P and Dow Jones gaining 1% to 1.5%, the NASDAQ up half a percent, and the Russell 2000 (the broader market index) leaping up by 2.1%. Key movers included Merck & Co. (up 5%), Home Depot, Philip Morris, Lowe’s, and Meta. Merck, in particular, has seen a strong pull, moving from $80 to $105 recently.
S&P 500 Heatmap
However, the S&P 500 heat map showed Nvidia taking a beating, down 2.59%, while other big market cap companies like Google, Meta, Microsoft, EVgo, JPM, Visa, and Mastercard did quite well. Some of these stocks could potentially be part of the Weekend Investing US stock strategy, but please note these are not recommendations, and the disclaimer applies.
Tweet Of The Day
A chart shared in the “tweets of the day” segment focused on silver in U.S. dollar terms, quoting Bullion Smart: “Never rubbish a bull market because it has paused to take a rest.” The weekly chart shows that silver is at its all-time highest weekly close point, suggesting that the precious metals rally is not over, despite many writing it off four or five weeks ago. A very strong upward rally is quite possible, underscoring the lesson to never assume things in the market or write off a rally just because it is pausing or correcting.
Another important lesson came from a tweet regarding the Zoom stock. It highlighted that stocks do not follow earnings linearly. Zoom’s income skyrocketed from $20 million five years ago to $2 billion now—a hundredfold increase. Yet, its stock price went from $50 to a peak of $600, and is now back down to $80-$85.
This demonstrates a complete lack of correlation between stock price and current income/earnings level, especially in the short to medium term. The significant part of the company’s future prospects was initially discounted at the peak and then discounted back down for various reasons. The crucial takeaway is to never try to correlate or equate earnings or revenue growth with stock price.
