Good, Bad & Ugly Weekly Review : 17 Jan 2025

Markets Overview

It was not such a bad week for the market, especially compared to the previous one, which was terrible and saw key support levels being tested. We could have witnessed a more drastic fall had those levels broken decisively. Instead, the market managed a small bounce. Now, all eyes are on President Trump’s upcoming statements (post-Monday) and any optimistic sentiment that might emerge from the Union Budget on February 1st. These next two weeks may be driven by speeches: one about potential tariffs on Indian exports, and the other about broader policies that might influence the U.S. dollar. Currently, most currencies have weakened 5–10% against the dollar in anticipation, while the rupee has dropped only 2.5%. We’ll have to see what final policy announcements bring.

On the Nifty’s daily chart, which also shows the 50-day and 200-day moving averages (DMAs), the index lost around 1% for the week. Although it broke down from last week’s level, it hasn’t plummeted sharply. The market is consolidating here, which might be positive if it continues for another couple of weeks. We shouldn’t expect a sudden rally; a gradual recovery from this base seems more likely. Notably, the 50 DMA has now crossed below the 200 DMA, called the “death cross,” which statistically increases the likelihood of further downside. However, this is only a probability indicator, not a certainty.

Nifty – Weekly Perspective

The weekly chart places Nifty just below a key support level, forming a doji candle that signals indecision. On one hand, this could mean a potential bounce, but on the other, if any negative trigger emerges, the support might give way, leading to a sharp drop. In the past seven months, we’ve come back to the same levels we saw in May and June, effectively nullifying that period’s gains. The market seems to be waiting for new triggers. Corporate results have started trickling in—Axis Bank and Infosys did not deliver stellar figures, yet the market has taken these in stride so far.

S&P 500 Overview

In contrast, the S&P 500 in the U.S. soared 2.9% this week, suggesting that market participants there are welcoming the new president. The U.S. market is at or near its peak, showing little sign of weakness. It continues to outperform with no clear indication of a top forming just yet.

GOLD Overview

Gold (in INR terms) performed well, closing at a weekly high near the Rs. 80,000 mark for 10 grams. Gold has become a critical component in many portfolios, proving to be a strong diversifier. If you haven’t added gold yet, it might be worth considering. If you already hold some, you could think about adding more. In the current environment, gold is showing resilience, even as other assets struggle.

Dollar Index Overview

The dollar index, which climbed from around 100 to 110, had a calmer week. Still, it has decisively broken past its previous tops, suggesting its intermediate trend remains upward. To reverse this climb, the dollar index would need to break below its prior low. A declining dollar index generally triggers strong foreign inflows into emerging markets, as investors look to benefit from currencies strengthening against the dollar. However, at the moment, sentiment points toward a still-strong dollar. This narrative of “USD/INR reaching 90–95” discourages many potential investors and NRIs from bringing money in right now, while simultaneously prompting FIIs to take funds out of India.

Benchmark Indices Overview

Looking at benchmark indices, the Nifty Next 50 recovered 1.24% this week after recently being one of the biggest losers. The Nifty declined by 0.97%, small caps by 0.79%, and the overall losses weren’t as harsh as they were in the preceding week. Over one month and three months, these indices remain in the red, but the one-year picture is still green. The Nifty Next 50 is up 20% over that period, which is actually above its typical long-term average. Meanwhile, the Nifty 50 has gained 7.56% in the past year—somewhat below its average, but not alarming. Even with the short-term correction, investors should remember that, over a one-year timeframe, the market still holds decent gains.

Sectoral Overview

In sector performance, IT lost ground this week, while real estate, media, FMCG, services, consumption, pharma, MNCs, and private banks also fell by around 1% or more. Meanwhile, PSU banks, central PSEs, metals, commodities, and energy saw a bit of a bounce. Looking back one year, media, FMCG, energy, and private banks have underperformed. On the other hand, pharma, autos, CPSEs, and consumption have fared better. Over three to five years, most sectors remain in positive territory except a few like oil and gas or private banking, which have lagged significantly. This underscores the importance of not concentrating too heavily in weak-performing sectors if you manage your portfolio actively.

From a momentum perspective—based on one-week, one-month, three-month, six-month, and one-year performance—pharma, consumption, autos, and infrastructure currently rank high. IT and real estate have fallen back in the short term, but pharma and consumption remain resilient. FMCG, which often acts as a defensive sector, is lower in the rankings this time, possibly because valuations remain expensive. So far, the market is rotating money into pharma and consumption stocks, which have held up better during this recent weakness.

Rebalance Update for the week !

Note : Mi EverGreen will have a special mid-period rebalance.