Why is Gold Falling ?

Market Update - Friday, 20 Mar

There is a visible sigh of relief among market players as the week comes to a close, offering at least two days where the markets cannot go down further. A joke currently circulating in the market suggests that FOMO has a new name: "fear of market opening."

A significant point of discussion today is the price of gold, which has been slammed down over the last 24 hours. After trading near 15,800 or 15,600 on a 10-gram basis, it suddenly dropped to 14,200 and is currently trading at 14,800. This indicates that the short-term and potentially mid-term trends for gold are broken.

The market currently appears absolutely flat, with a movement of 0.49% being neither here nor there. All momentum trends remain negative, and we are at the lowest point since the war started. Every attempt to move higher has failed. Oil prices, which hit 119 yesterday before collapsing to 105, are back near 111 at the time of this recording.

• Nifty Junior was flat at 0.45%, while mid-caps rose 0.6%, maintaining a positive short-term trend.

• Small caps were up 0.26%, and the Bank Nifty remained absolutely flat. HDFC Bank has struggled to recover after yesterday’s drubbing.

• While gold had a small 1.23% uptick today after being thrashed yesterday, its mid-term trend remains negative.

• Silver also struggled, down 0.39% for the day.

Other Market Triggers

• HDFC Bank led the market down today, dropping 2.22%. For years, the bank’s 20% growth and marquee management led many to view it as a pristine institution where nothing could go wrong. However, as companies grow larger, they can become inefficient or enter a comfort zone.

• Reliance led the markets up today, and the energy, IT, steel, and commodity sectors are beginning to inch higher.

• In the Nifty Next 50, PSU banks like Bank of Baroda, Canara Bank, and PNB performed well, alongside Jindal Steel and Hindustan Zinc. Losses were seen in Lodha, Solar Industries, Mazagon Dock, and CG Power.

• In the movers of the day, Brainbees (First Cry) rose 19.43% following news of quick delivery services in Bangalore, Pune, and Hyderabad.

• Olectra also saw a 9.65% bounce after recently hitting a new low. These movements remind us that stocks don't grow to the skies, nor do they fall to the ground indefinitely; they eventually find a range where they refuse to go lower.

U.S. Market Updates

• In the US, markets were down between a quarter and half a percent, though the Russell 2000 rose 0.6%.

• Gaining stocks included Accenture, Starbucks, AMD, Intel, and ConocoPhillips—some of which are part of our US stock strategy.

What to watch next ?

• The market is largely in a "wait and watch" mode; if oil climbs to 120 or 130, markets are expected to fall further.

• The primary signal the market awaits is the stabilization of oil. Meanwhile, the rupee continues to tank, currently sitting around 93.75, with some forex analysts predicting a range of 95 to 100 very soon.

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What To Read This Week ?

The Great Reset: Understanding Price vs. Valuation Correction

The market isn't always what it seems on the surface. While many investors fixate on the index price, a more profound shift is happening beneath the hood: P/E Contraction. Recent data (courtesy of Edelweiss and Debashish Neogi) reveals that even while earnings grow, the "multiples" investors are willing to pay are shrinking.

Nifty 50: The 16% Hidden Drop

From September 2024 to March 2026, the Nifty 50 index saw a modest price decline of roughly 5% (falling from 26,000 to 24,865). However, this doesn't tell the full story. During this period, earnings actually grew by 6%.

Because the Price-to-Earnings (P/E) ratio contracted from 24 to 21.8, the "Total Correction" (combining price and valuation) effectively sits at a much heavier 16%.

Mid-Caps: Growth vs. Sentiment

The Mid-Cap segment presents a fascinating paradox. While the price correction was a minor 4%, the underlying earnings surged by a massive 37%. Ordinarily, this should send prices skyrocketing. Instead, we saw a staggering 30% P/E contraction. When you net these out, the total correction for Mid-Caps reached 34%, proving that even stellar growth can’t always protect a stock from a cooling valuation environment.

Small-Caps: The Steepest Descent

Small-caps have felt the most heat. With a 15% price drop and a 23% P/E contraction, the total correction has ballooned to 38.9%. Despite earnings growing by 11%, the "unrealistic expansion" of the previous years is being aggressively corrected by the market’s "realistic contraction" phase.

The Verdict: Complexity vs. Simplicity

You can view the P/E ratio as a market "barometer"—it expands with greed and contracts with fear. If you enjoy the data, these metrics help you understand why the market is moving. However, if you want to keep your life simple: Follow the Price. When the price trends up, you stay in; when the price trends down, you exit. You don't need to be an economist to succeed if you respect the trend.

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