Where is the market headed?
The market opened this Tuesday, January 27, following a long weekend with expectations of a robust upward move. Two primary factors fueled this optimism: indications from the Trump administration regarding the potential removal of additional tariffs on India, and the formalization of the Free Trade Agreement (FTA) between India and the European Union. The EU deal is a landmark achievement, and the government deserves congratulations for reaching this milestone.
Despite these positive developments, the market’s response was surprisingly muted and somewhat disappointing. One might have expected these news items to signal a market bottom and spark a pre-budget rally. However, the limited quantum of today’s move suggests underlying weakness.
As the day progressed, silver saw extraordinary volatility, jumping from Friday’s close of roughly $89 to $117 before experiencing a 15% intraday drop. Interestingly, this massive correction is hardly visible on the long-term charts, suggesting that the upward trend in precious metals remains intact.
Market Overview
The Nifty gained a modest 0.51% today, remaining nearly 1,400 points below its recent peak. With only three sessions left before the budget, the lack of momentum is unusual. Typically, markets build anticipation leading up to the budget, but the current stagnation suggests either significant investor caution or fears of unfavorable news.
Nifty Next 50
The Nifty Junior and Mid-cap indices followed a similar flat trend, rising 0.66% and 0.53% respectively, while Small-caps rose marginally by 0.2%.
Nifty Mid and Small Cap
Bank Nifty
The standout performer was the Nifty Bank, which gained 1.25% and recovered nearly all of its previous day’s losses. This strength is primarily driven by the PSU banking and small finance space, though private banks have yet to catch up.
GOLD
In the commodities space, gold continues its ascent to 15,926, and silver is up approximately 45% in just one month. These are once-in-a-century moves that signal a potential realignment of global power and economic orders. Given the intensity of these trends, it is vital for investors to avoid risky bets like shorting these metals simply because they seem “too high.” If one cannot participate, staying on the sidelines is a far safer strategy than taking positions that could lead to catastrophic losses.
SILVER
Advance Decline Ratio
The advance-decline ratio remained relatively flat for most of the day but ended with a positive tilt of 307 advances to 193 declines.
Heat Maps
In terms of individual stocks, Kotak Bank fell 3.3%, and Mahindra & Mahindra dropped 4% on concerns that the EU deal would bring cheaper competition. Such fears appear misplaced, as the duty changes involve completely built units, making it an “apples to oranges” comparison.
Conversely, JSW Steel, UltraTech Cement, and TVS Motors performed well. State Bank of India saw fantastic gains, and Adani stocks recovered after denying recent charges.
In the Nifty Next 50, Vedanta and various oil stocks showed strength, while DLF climbed 3.59% following positive management commentary. On the downside, JSW Energy fell 8%, joined by losses in Hyundai and Naukri.
Mover Of The Day
Sectoral Overview
Sectorally, the Metals index led the way with a 3% gain today, cementing its position as the best-performing sector over the last month at 9.47%. Other gainers included PSU banks and central PSEs. Conversely, the auto, media, and FMCG sectors faced the sharpest declines.
Sector of the Day
Nifty Metal Index
U.S. Market
Looking at global cues, US markets saw mixed results on Monday; while the Dow and Nasdaq rose nearly 0.5%, Intel dropped 5.7%, and Nvidia and Tesla also traded lower.
Tweet Of The Day
A recurring pattern in the stock market involves a period of distribution where a stock stagnates for several quarters before the “rug is pulled” and it collapses. This was recently observed in stocks like ITC and Signature Global. When a stock loses relative strength and begins to stagnate, it becomes vulnerable to sharp drops on any bad news.
Momentum investing aims to mitigate this risk by staying with a trend while it is up and exiting as soon as it begins to falter. This approach helps investors avoid the pain of deep drawdowns and the difficult task of trying to recover lost capital.
