Why Market Rallied despite U.S. Govt. Shutdown ?

Today’s Market Update

It was a good start to the month with Nifty and other parts of the market rallying. This came despite the US government shutting down.

Now what does a US government shutdown mean? It basically means that all non-essential activities of government agencies in the US stop functioning. Non-essential workers stop getting paid, no new recruitment happens, and parks along with other public facilities that are not critical get closed.

In the past we have seen many such shutdowns. Almost always, both sides of Congress eventually meet and raise the borrowing limit of the US government. This cycle keeps repeating, almost like having an endless credit card where the limit gets extended every time it is reached.

• Nifty posted a strong green candle with a 0.92% rise, closing above the two-day high at 24,836.

• Junior Nifty was up 0.36%, midcaps rose 0.86%, Smallcaps gained 1.06%, and Bank Nifty rallied 1.3%.

• Gold prices also moved higher by 0.67%, trading around ₹11,752 per gram. With the US shutdown creating uncertainty, gold may touch $4,000 if the deadlock persists, from the current level near $3,890.

Other Market Triggers

• Private banks like Kotak, Axis, ICICI, and HDFC performed well.

• Tata Motors rallied 5.6% after its demerger announcement.

• Sun Pharma, Adani Enterprises, and several other stocks also had strong sessions, though PSU banks, Steel, and Cement Stocks faced some losses after their recent rally.

• In the Nifty Next 50, Adani Group stocks surged again. United Spirits, Naukri, IRFC, PFC, and REC also gained on hopes of infrastructure status and lower borrowing rates.

• The mover of the day was Nazara Tech, which jumped 9% after reporting strong sales growth. Concerns about management efficiency still remain, but for now sales numbers supported the stock.

U.S. Market Update

• In the US, markets were positive in the last session with the S&P 500 up 0.4% and Nasdaq up 0.3%. Over the past week, US indices are higher by about 1%, except small caps.

• Pharma names like Pfizer, Merck, Eli Lilly, Danaher, and Thermo Fisher have been running strongly there.

What to watch next ?

• The last shutdown was during Trump’s presidency, and in fact three shutdowns happened under his term. For the last six years there hasn’t been one. But just because previous shutdowns did not cause much damage does not mean this one can be ignored.

• With the current administration being rigid and inflexible, if they don’t compromise, the government may not function properly. That can easily lead to a major disaster.

• Economists have warned that GDP could drop by 0.2% each week if the deadlock continues. This can create chaos not just for the US but for the rest of the world too.

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What To Read This Week ?

📰 The De-Globalization Playbook: China's Proactive Market Shift & Lessons for India

The Great Export Rebalancing: China's De-Risking Strategy

The ongoing pressures of de-globalization and the resultant tariff crisis have prompted China to undertake a calculated and significant geographical shift in its merchandise export strategy. A concentrated effort is underway to de-risk the nation's GDP by reducing reliance on historically dominant markets. This pivot towards self-reliance (Atmanirbhar) is emerging as the best defense against countries looking to erect new trade barriers and tariffs.

Key Action: China is actively redistributing its market share to mitigate geopolitical trade risks.

An illustrative comparison between China's merchandise export share in 2018 and its 2025 projections clearly demonstrates this market rebalancing.

This dramatic shift highlights a deliberate move away from dependence on the U.S. market, while fostering new trade ties with Asia, Africa, and Latin America.

Lessons for India: Self-Reliance and Concentration Risk

India's economic structure provides a relative advantage in this de-globalizing environment, as it is not as heavily reliant on exports compared to China. However, the nation has also rightly embarked upon the Atmanirbhar (Self-Reliance) mission, which aligns perfectly with the current global trend of de-risking supply chains and economies.

The Chinese lead in market redistribution offers a crucial lesson for India:

• Avoid Concentration Risk: No single country should dominate India's export destination portfolio to such an extent that it creates a systemic concentration risk.

• Domestic Focus: The pursuit of self-reliance is a sound strategy to safeguard current GDP against external volatility.

While India's growing exports are a positive sign, the nation's significant reliance on energy imports remains a major point of vulnerability that requires a separate strategy for mitigation.

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