The War Has Intensified

Market Update - Wednesday, 11 Mar

The global landscape has seen an intensification of conflict despite recent efforts to find a diplomatic off-ramp. While there was hope that backing off and calling out the situation might quell the war, the reality remains different as of now.

Meanwhile, closer to home, India is grappling with a deep LPG crisis. The country imports approximately 50% of its LPG, and the strain is becoming visible as various commercial establishments begin to shut down. Industrial units reliant on gas are likely to face significant disruptions, which unfortunately means many temporary workers may soon find themselves out of work. This situation has hit India like a thunderbolt out of the blue.

From a broader perspective, the U.S. military-industrial complex often thrives during times of conflict; their economy is structured such that wars can be beneficial, however distressing that may sound. Similarly, Israel has defense equipment to sell to the world. If the current conflict escalates or eventually concludes, these entities stand to gain billions or even trillions of dollars in contracts for rebuilding.
The market bounce seen recently was completely erased, with the Nifty finishing down 1.63%. The low from Monday’s candle is now a critical test; if that level is broken, the market may move lower or perhaps consolidate between the 23,500 and 23,800 marks.

• While Nifty Junior gave up much of its previous gains, it dropped 1.08%, appearing slightly more resilient than the Nifty.

• Mid-caps fell 1.14%, but small-caps offered a small ray of hope, dropping only 0.39% and retaining a significant portion of their prior gains.

• The Bank Nifty led the downward trend with a 2.13% drop.

• In other assets, Gold remained flat at 16,269, while Silver fell 2% to 27,122.

Other Market Triggers

• The Nifty heat map was almost entirely red, hitting finance companies, Axis Bank, and both private and public banks. IT, Reliance, and the auto sector also lost significant ground.

• The Nifty Next 50 showed similar weakness, with heavy selling in TVS Motors, Hyundai, and other auto stocks.

• However, Adani Total Gas Limited emerged as a major mover, jumping 20% as supply fears allowed for price hikes and boosted margins.

• Other companies like TTK Prestige, Gandhi Mati, and Stove Kraft also saw gains of around 10% as the gas shortage drove interest in electrical cookers and related products.

U.S. Market Updates

• In the U.S. markets, companies like ServiceNow, Intuit, Accenture, Palantir, and Boeing led a decline of 3 to 4%.

• However, the S&P 500 only fell 0.2%, while the Dow Jones and NASDAQ remained nearly flat.

• The U.S. markets are not witnessing the same level of panic as India, partly because segments of their economy stand to benefit from the war.

What to watch next ?

• A look at the ratio chart of small and mid-caps versus large-caps shows that smaller stocks are once again beginning to outperform.

• After a strong 2024 and a pivotal 2025, small and mid-caps are showing strength, potentially due to persistent Foreign Institutional Investor (FII) selling in large-cap names.

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What To Read This Week ?

Gold’s Record-Breaking Horizon: Analyzing the 2026 Demand Surge

The latest data presented by the Kobeissi Letter paints a fascinating picture of the global gold market. As we move through 2026, the traditional dynamics of supply and demand are being pushed to their limits, suggesting a massive "demand pull" that could redefine gold's price trajectory.

The Demand Breakdown: Who is Buying?

The total gold demand for 2026 is projected to reach a staggering 4,900 metric tons. This demand is diversified across four primary sectors, each showing unique resilience:

• Jewelry (1,700 tons): Contrary to popular belief that high prices would dampen the jewelry market, demand is actually expected to grow by 100 tons this year.

• Central Banks (~1,000 tons): Global central banks continue their aggressive accumulation, maintaining a consistent buying streak of roughly 1,000 tons annually.

• Bars and Coins (1,300 tons): Physical investment remains steady and slightly elevated compared to previous years, reflecting a "flight to safety" among retail investors.

• ETFs (900 tons): After significant outflows in 2021 and 2023, ETF demand has returned with a vengeance. We haven't seen inflows this strong since 2020, far surpassing the interest seen during the 2011 gold peak.

The Massive Supply Gap

While demand is skyrocketing toward 5,000 tons, global mine production remains relatively stagnant, hovering between 3,000 and 3,500 tons. This leaves a massive 1,500-ton deficit that the earth simply isn't providing.

So, where does the extra gold come from? It must come from recycled gold—existing jewelry and bars held by the public. However, people generally only sell their "old gold" when the price hits a level high enough to entice them. This creates a cycle where high demand pulls the price up, and the price must stay high to attract enough recycled supply to meet that demand.

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