Is Your Wealth Actually Growing?

Market Update - Tuesday, 03 Feb

Last night, near midnight, an announcement was made by both President Trump and Prime Minister Modi that India and the US have agreed to a deal. Under this agreement, the tariff rate for India will be 18%, which is much lower than China and many other emerging markets, placing India at a significant advantage.

There is always some give and take in any deal, especially when negotiating with a global power that is certainly a dominant force, but from that perspective, the outcome has been good. India did not succumb to pressures immediately and took its own time.

Consequently, the market opened on a very ballistic note today and, although it gave up some ground as expected, it still ended on a very strong footing. There is reasonable optimism for the path ahead because the stance of Foreign Institutional Investors is likely to change from the daily selling seen so far.

There is a lot of chatter about sovereign gold bonds, and a midday look at the NSE screen showed that approximately 58 crores of business had been done by roughly 1 PM. This represents very brisk business rather than illiquidity. Sovereign gold bonds and ETFs are now vying for the same pie since there is no taxation difference between them.

• Looking at the markets, the Nifty opened with a bang and hit a high of 26,340, which was the previous high. Within the first few minutes, it came down and stayed at that level for the whole day, closing at 25,700. This represents a gain of 639 points or 2.55%.

• The Nifty Junior rose 2.65%, performing better than the Nifty and crossing its earlier pivot and moving averages. While mid-caps were up 2.92% and small-caps rose 2.94%, these charts are so beaten down that it is difficult to say if this move will sustain.

• The Nifty Bank remains the only major index with all positive momentum trends, closing up 2.43% in the realm of previous highs.

• Gold is coming back up, rising 4.3% today to 1,51,000 per 10 grams, while silver rose 8% to 2,66,950.

Other Market Triggers

• The Nifty heat map showed no red on the screen, with Reliance leading the pack. It is said that if there is a switch from Russian oil to Venezuelan oil, Reliance has the refineries to process that specific grade.

• Maruti, Titan, State Bank of India, ICICI Bank, HDFC, and Axis Bank all did well.

• Adani stocks like Adani Enterprise and Adani Ports rallied on rumors that recent issues highlighted in the US may not be pursued further.

• In the Nifty Next 50, only VBL and Godrej CP were down. Capital goods stocks like Mother Son, ABB, Siemens, and CG Power did extremely well, as did Chola Finance, Divis Lab, Solar Industries, and Ambuja Cements.

• Avanti Feeds was a major mover at plus 20% along with other textile and shrimp stocks that are direct exporters to the US.

U.S. Market Updates

• US markets were also up between 0.5% and 1%, with Apple leading from the front alongside Walmart, Costco, Amazon, and Intel, while Tesla and Microsoft remained soft.

• Some of these may be part of the Weekend Investing US stock strategy, though these are not recommendations.

What to watch next ?

• The leadership has managed to clinch two big deals that few other countries have achieved, all while engaging with the EU, the US, China on Alipay and UPI, and negotiating with BRICS.

• This fantastic diplomacy is a very big win for India. The team believes it is a good day for the country and everyone should be looking up for the path ahead.

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What To Read This Week ?

The ITC Reality Check: Is Your Wealth Actually Growing?

We often celebrate when we see our favorite stocks like ITC climbing the charts in Rupee terms. A 12% or 14% return looks great on a brokerage statement, but there is a hidden metric most investors ignore: The Gold Ratio.

If we stop measuring ITC in Rupees and start measuring its value in grams of gold, the picture changes dramatically. What looks like a mountain of growth often turns out to be a flat plain.

The 27-Year Stagnation

Believe it or not, the ITC/Gold chart has recently hit a 27-year low. The current ratio of ITC stock price to gold price is roughly the same as it was in 1999.

In simple terms: if you traded a specific amount of ITC stock for gold in 1999, you would end up with nearly the same amount of gold today. Despite the dividends and the price action we see in INR, ITC hasn’t actually "outperformed" gold in nearly three decades.

The Deception of Money Supply

Why does this happen? Our financial system is designed around an increasing money supply and consistent inflation.

• Nominal Gains: When the Rupee loses value, asset prices (like stocks) naturally rise to compensate.

• The Illusion: You feel wealthier because the "number" is bigger, but your purchasing power—measured against a hard asset like gold—remains stagnant.

It’s not just ITC; even the Nifty 50, when viewed in gold terms, has struggled to show significant real growth over the last twenty years.

Real Value vs. Paper Gains

The true winners in the market are the rare stocks that actually move the needle against gold.

• If a stock's ratio against gold is rising, it is creating Real Value.

• If the ratio is flat or falling, the stock is simply keeping pace with (or losing to) inflation.

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