WAR & The RBI Warning

Market Update - Monday, 30 Mar

With tomorrow being a trading holiday, this has not been a great month to discuss, especially as today saw another escalation in the war. Brent oil prices rose, leading to a decline across most Asian markets. Currently, the local markets are lacking specific cues and are primarily following global trends.

Regarding where the market is headed, it has now reached its lowest close since the war began, down 2.014%. Short, mid, and long-term trends are all negative, and support must be found soon to enable any future upward movement.

• The Nifty Junior fell dramatically by 2.73%. This is partly due to March year-end loss harvesting, where investors sell their losers to book losses against any gains, though gains are currently difficult to find.

• Mid caps and small caps also faced a negative day, dropping 2.6% and 2.5% respectively, returning to levels seen earlier in the month.

• The market is in an extreme oversold situation, with the banking system acting as a back-breaking force.

• The Nifty Bank led the decline, dropping 3.82%.

• In contrast, gold is up marginally by 0.91% and seems to be stabilizing with the potential to rise, while silver increased by 1.88%.

Other Market Triggers

• On this very red day, a few stocks like Reliance, Hindalco, Coal India, and ONGC were spared.

• However, heavyweights took a hit, with HDFC Bank down 3%, State Bank down 4%, and no relief for Kotak, Axis, or ICICI.

• Other previously strong performers like Bharti Airtel, UltraTech Cement, Eicher Motors, and Mahindra were also wiped out.

• The Nifty Next 50 performed extremely poorly, with Bank of Baroda, PFC, DLF, IRFC, Hindustan Aeronautics, Motherson, and United Spirits all down badly.

• Vedanta was an exception, rising today following an announcement to split the company into five parts.

• Other movers of the day included National Aluminium, which rose 4% due to production facility damage in the UAE and Bahrain, which is expected to increase pricing power.

• Renuka Sugars also saw surging demand as ethanol becomes more profitable and pricier amidst tightening global oil supplies.

U.S. Market Updates

• This followed a dramatic previous session in the US markets where indices fell 1.5% to 2%, and stocks like Starbucks, Citigroup, ServiceNow, Meta Platforms, and Amazon dropped 4% to 5%. Some of these stocks could be part of the Weekend Investing portfolio.

• The NASDAQ 100 heat map was also extremely red, showing significant drops for Amazon, Microsoft, Meta, Google, Apple, Nvidia, and Avgo.

What to watch next ?

• The RBI attempted to intervene in the Forex markets by announcing that banks will no longer be able to hold more long dollars.

• This triggered a sharp initial reaction with the Indian rupee gaining more than 1%, but most of those gains were lost by the evening.

• It appears the markets are unwilling to toe the line of the regulator, and the falling rupee remains a weakening factor for the rising import bill.

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What To Read This Week ?

The Price of Admission: Why Risk is Your Best Friend in Wealth Creation

Charlie Bilello recently shared a powerful breakdown of market data spanning over 100 years. His core message is simple yet profound: "Without risk, there would be no reward." If you want the higher returns of the stock market, you aren't just paying with your money; you’re paying with your nerves.

The data suggests that the "outperformance" of stocks over bonds isn’t a gift—it’s a compensation package for enduring the rollercoaster ride of volatility.The 14-Year "Flatline"

The Safety Trap: 100% Cash

Many investors seek total safety, but the data shows that "safety" has a hidden cost.

• The Return: Over the last century, cash provided an annualized return of about 3.3%.

• The Reality Check: Once you adjust for inflation, that return drops to virtually zero.

• The Upside: You get positive returns 100% of the time with zero drawdown (your principal never drops).

• The Verdict: You won’t lose money, but you won't grow wealth either. You are essentially standing still while the world gets more expensive.

The Growth Engine: 100% Stocks

On the opposite end of the spectrum, equity is the undisputed king of long-term wealth, but it demands a "volatility tax."

• The Return: An impressive 10% annualized total return.

• The Real Gain: Even after inflation, you’re looking at a 7% real return.

• The Emotional Cost: You only see green 73% of the time. This means for nearly 27 years out of a century, you are losing money.

• The Deep Sting: The maximum drawdown recorded was a staggering 65%. Imagine seeing your savings cut by more than half—that is the price of entry for 10% returns.

Finding the "Sleep Well at Night" (SWAN) Ratio

The beauty of asset allocation lies in the middle ground. Bilello’s data shows a linear relationship: as you move from 10% stocks to 100% stocks, your returns rise, but so do your drawdowns.

Your goal isn't to find the "best" portfolio on paper, but the one you can stick with when the market crashes. If a 65% drop will make you panic-sell, then a 100% stock portfolio is objectively "wrong" for you, regardless of the high returns.

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