Why HDFC Bank is "Flat" Since 2006

Market Update - Tuesday, 10 Feb

The markets are currently in fine fettle and moving upward. Although there was some correction during the day, the market is surprisingly refusing to come down for many people. Over the last three sessions, the lower part of the market, specifically small caps and micro caps, has been running.

A recent tweet from Neil Borate at Mint mentioned that net inflows into gold ETFs reached 24,000 crores in January, which is similar to equity inflows. Silver also saw inflows of another 10,000 crores. This has created a narrative that gold and silver have peaked because they have gone beyond equity, but nothing could be farther from the truth.

Looking at the charts, the market is very stable, especially since the US deal was announced. On the first day of that announcement, there was a sell-off, but the market has remained in that range since.

• Nifty Junior is up 0.14% and looking good with positive momentum scores.

• Mid caps rose another 0.4% and small caps were up 0.5%. While the long term is yet to go positive on small caps, the current trajectory suggests it could happen.

• Small and micro caps were beaten down so much that investors lost hope, leading to a rally of disbelief. As it continues and crosses previous benchmarks, people will realize everything has doubled and wonder how to buy in. This is a repeating story. The outlook remains positive unless a global crash occurs, which is a risk that exists at any time. To protect against that, you need asset allocation in gold and silver.

• Today, gold was flat at minus 0.32% and silver was flattish at minus 1.67%. Notably, the Chinese gold exchange will close for nine days for the Chinese holidays, giving Western exchanges like Comex and LBMA a free run on price setting.

Other Market Triggers

• The Nifty heat map was largely green, with good gains in L&T, Maruti, Mahindra, ONGC, Zomato, TCS, Axis Bank, and Tata Steel, while HCL Tech, Bajaj Finance, and Bharti Airtel saw some losses.

• In the Nifty Next 50 space, Motherson, Vedanta, DMart, and Torrent Pharma saw gains, while Hindzinc, Adani Power, Chola Finance, and BPCL lagged.

• The mover of the day was Zomato, up 5.1% after consolidating for a while. The news of Deepinder Goyal stepping down has been absorbed, and the stock is looking toward a new trend.

U.S. Market Updates

• The previous session in US markets was also strong, with the S&P 500 up 0.4% and NASDAQ up 0.7%.

• Oracle led with a 9.6% gain, while Palantir, AMD, Broadcom, and Microsoft rose 3% to 5%. Some of these are part of the Weekend Investing US stock strategy, though these are not recommendations.

• The NASDAQ heat map showed nice gains for AMD, Cisco, Broadcom, Nvidia, Meta, Microsoft, and Tesla.

What to watch next ?

• Over the last three sessions, the lower part of the market, specifically small caps and micro caps, has been running. As it always happens, people are in complete disbelief that these stocks can rise.

• Markets often climb a wall of worry, which is exactly where things stand right now as nobody is really expecting a large rally. However, conditions are very favorable. The market has corrected and consolidated for a year and a half, interest rates are down, and inflation remains benign.

• With great deals recently struck with the EU, US, and the Gulf, everything seems to be in place for a rally. FII numbers are also beginning to look better.

• Investors will not receive a formal notice to look out for a rally; it will simply happen. Eventually, people will feel the heat and realize the market has started to move and that they are being left behind.

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What To Read This Week ?

The 2,500% Illusion: Why HDFC Bank is "Flat" Since 2006

Most investors celebrate when they see their portfolio up 15% or 20% in a year. But there is a hidden trap in those numbers. Because we measure our success in Fiat Currencies (like Rupees or Dollars), we often ignore the fact that the "measuring tape" itself is shrinking.

Central banks constantly increase the money supply, effectively debasing the currency. This creates an Artificial Wealth Effect—the price of your assets goes up, but so does the price of everything else. You feel richer, but your purchasing power might just be running in place.

HDFC Bank: A 30-Year Reality Check

HDFC Bank is widely considered the gold standard of Indian banking. If you look at its performance since 2006 in Rupee terms, the numbers are staggering—it has surged by roughly 2,500%.

However, when you swap the Rupee for Gold as the base of measurement (HDFC/Gold Ratio), a different story emerges:

• Rupee Terms: ~2,500% Gain

• Gold Terms: ~13% Gain

The Stagnation Secret

Since 2006, HDFC Bank has essentially been "stagnant" against Gold. This doesn't mean it’s a bad investment; it means that the massive gains we see in INR are largely a reflection of the Rupee losing value against hard assets. When measured against "Real Money" (Gold), the outperformance is nearly zero.

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