Where is the market headed?
On this Wednesday update, we observed a relatively stable day in the markets. While there wasn’t much volatility in the headline indices, the broader market showed strength. Small-cap and mid-cap segments performed quite well, continuing their upward momentum.
Investors are now keenly awaiting Friday’s RBI interest rate decision, while global concerns like the Russia-Ukraine war remain on the periphery but haven’t significantly impacted market behavior yet.
Market Overview
The Nifty closed 0.32% higher at 24,620. Notably, the index hasn’t attempted to fill the gap below, which could mean that if a market shock were to occur, a decline to around 24,000 could be a probable correction zone.
Nifty Next 50
The Nifty Junior was also up 0.3%, dipping early in the session but recovering by the close.
Nifty Mid and Small Cap
Mid-cap stocks surged 0.8%, having rallied from 17,200 in April to nearly 21,000—a remarkable 20% gain. Small caps mirrored this performance, jumping from 13,200 to around 17,000 over the same period.
Bank Nifty
Nifty Bank was mostly flat, up just 0.14%, consolidating in a flag-like formation.
GOLD
Gold continued its ascent, gaining 0.5% and currently priced at ₹9,840 per gram.
Advance Decline Ratio
The advance-decline trend showed some volatility. Morning sessions saw a sharp dip in advancing stocks, which recovered later. By day’s end, out of the top 500 stocks, 313 advanced while 188 declined, reflecting a positive bias.
Heat Maps
Looking at the heatmap:
Top performers included HDFC Bank, Jio Finance, Reliance, Infosys, Bharti Airtel, and Eternal.
On the downside, stocks like TCS, Bajaj Finserv, L&T, Titan, Shriram Finance, and Naukri saw losses.
Swiggy stood out with an impressive 8.8% gain.
Other notable gainers included Motherson, CG Power, JSW Energy, and LTIM.
Sectoral Overview
In sectoral action, tourism and defense stocks led the way, up 1% and 0.9% respectively. Other sectors like oil & gas, metals, infrastructure, MNCs, energy, commodities, and CPSCs saw modest gains of 0.5–0.7%. Real estate, however, faced some profit-booking following a strong previous session.
Sector of the Day
Nifty India Tourism
Key tourism stocks like Jubilant Foodworks, Indian Hotels, IRCTC, and Interglobe Aviation performed well, while Real estate names like Phoenix Mills, Brigade, Anant Raj, Godrej Properties, and Oberoi Realty corrected.
Nifty Realty Index
Story of the Day: Beginning of the Dollar Decline ?
Crescat Capital’s long-term chart reveals that 2025 has been one of the weakest years for the dollar in over 30 years.
Bloomberg’s data further confirms that short positions on the dollar have reached their highest levels since 2023, indicating broad market expectations of a further decline. (see the image below)
As the dollar weakens, other currencies like the Euro, Japanese Yen, and British Pound are strengthening. For instance, the Euro could climb from 1.13 to 1.25, while the Pound, which was nearly at parity recently, has surged to 1.35.
This movement is intricately tied to US Treasury yields. Despite the Fed initiating rate cuts, bond yields haven’t responded as expected. The bond market seems to be calling the Fed’s bluff, indicating skepticism about the sustainability of current policy directions.
Analysts still expect yields to drop from 4.5% to around 4% by year-end, with potential rate cuts amounting to 175 basis points. Achieving this would require aggressive monetary easing and bond buying—injecting liquidity but also risking future inflation.
Tavares shared a noteworthy correlation between declining dollar-yield dynamics and stock market stagnation.
Historically, such scenarios haven’t been great for US equities, and a similar pattern may emerge again. However, this doesn’t imply uniform impact across global markets.
In fact, history suggests the opposite for India. During past periods of sharp dollar index declines, Indian markets have performed exceptionally well:
1985–1992 (Dollar fell 50%): Sensex in USD terms surged 416%. S&P 500 rose just 156%. Gold in INR terms rose 158%.
2002–2008 (Dollar fell 40%): Sensex in USD terms jumped 450%. S&P 500 moved up only 16%. Gold in INR terms increased 162%.
In both cases, a weakening dollar benefited Indian equities and gold significantly. This sets the stage for what could potentially be the third such phase in history, based on current dollar trends.
We may be entering another historic cycle where a declining dollar could spell outperformance for Indian markets and gold. If this unfolds as past patterns suggest, Indian investors may have much to look forward to.
Let us know in the comments how you think a weakening dollar could impact the global economy. Your thoughts are always welcome.
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