Why "Safe" Might Be Costing You

Market Update - Wednesday, 25 Feb

The market started the day with a strong showing but unfortunately gave up some of those gains by the closing bell. Jitters from overseas continue to persist, particularly regarding the rapid release of new AI agents by technology companies.

Celebrity fund manager Chris Wood has noted that Foreign Institutional Investors (FIIs) are selling Indian equities for various reasons. One primary point is that from a global equity fund manager's perspective, India is viewed as the reverse AI trade.

In recent weeks, FII selling in India has trimmed down dramatically. Net-net, they have actually been buyers in February, suggesting that downsides may now be very limited as the selling pressure dries out. Despite the global scares, the market may be forming a bottom with an intention to move up. This strength was visible in the morning, though it simmered back by the afternoon.

• Looking at the Nifty charts, the index almost challenged yesterday’s high but gave most of it back, ending up 0.23%.

• Other segments of the market are showing even more positivity.

• Nifty Junior is on a different path, hitting a recent high with a gain of 0.89%.

• Mid-caps and small-caps followed suit, both moving up by 0.64%, showcasing a very stable environment.

• The Nifty Bank was the outlier today, ending absolutely flat with a negligible dip of 0.01%.

• In commodities, gold is on the move again, priced at 16096 with a 1% gain, while silver saw a fast breakout of 4.3% to reach 2,81,504.

Other Market Triggers

• Large caps like TCS, HCL Tech, Infosys, and Wipro saw some gains, while Reliance and SBI were pushed down by 2% each.

• Within the banking sector, Kotak Bank was down, while Axis and ICICI closed higher.

• Auto and steel stocks performed well, whereas ITC and Bharti lost ground.

• In the Nifty Next 50 heat map, Vedanta, Hindustan Zinc, TVS Motors, Hyundai, and Divi's Labs performed well.

• Conversely, Adani Power, IRFC, and CG Power lost ground.

• A notable mover of the day was Concord Biotech, which jumped 14% after hitting a 52-week low, possibly due to a dead cat bounce.

U.S. Market Updates

• The US markets experienced a relief rally last night following a downturn two days prior. AMD rose 8.7% after being previously smashed down, while PayPal and Intel rose 5.7%.

• Booking Holdings and Salesforce also gained between 4% and 5%. While these are not recommendations, some of these stocks could be part of the Weekend Investing US stock strategy.

• The major indices moved up between 0.8% and 1.2%, with the NASDAQ heat map showing a largely green field led by chip makers.

What to watch next ?

• IT stocks saw a hard jump in the morning but gave back a significant portion of those gains.

• It is advisable not to jump in and buy IT stocks immediately; it is better to wait for consolidation and the formation of a clear new trend.

• While a V-shaped recovery is always a possibility, it currently looks unlikely, so it is important to ensure the trend is in your favor rather than trying to catch a falling knife.

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What To Read This Week ?

📈 Real Returns: Why "Safe" Might Be Costing You

In the world of investing, what you see isn't always what you get. While your bank balance might be growing, the purchasing power of that money is in a constant tug-of-war with inflation. Capital Mind recently released a compelling chart tracking 10-year rolling returns for three major asset classes: Nifty 50 (Total Returns), Gold, and PPF.

The results are a wake-up call for anyone sitting strictly in "safe" debt instruments.

The Real Numbers (Post-Inflation)

When we strip away the veil of inflation, the "Real Returns" tell a different story than the nominal figures we usually see:

The PPF Trap: Safety vs. Growth

While the Public Provident Fund (PPF) offers unmatched psychological safety and tax benefits, a 2.3% real return is incredibly lean. Even this figure assumes a standard inflation rate; for many individuals, "lifestyle inflation" is much higher. If your goal is significant wealth creation, relying solely on PPF might keep you safe, but it will also keep you poor in terms of real-world buying power.

Is Gold Overextended or Just Getting Started?

The data shows Gold at a historic 10-year rolling return peak. While traditionalists might see this as a signal to exit, we are witnessing a structural shift. Gold is no longer just a "crisis commodity"; it is evolving into a preferred neutral asset for central banks and global investors alike. Comparing current gold rallies to historical ones might be misleading because the global economic fabric has changed.

The Strategy: A Balanced Frontier

The takeaway isn't to dump one for the other. Instead, the magic lies in Asset Allocation.

• Equity provides the engine for long-term growth.

• Gold acts as the ultimate hedge and a neutral store of value.

• Fixed Income provides the stability to stay the course.

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