Tale of the Tape 

Howdy folks. Welcome back to the market of stocks!

Markets plunged in the last hour of trading, leaving the Nifty and Sensex barely in the green. This tracked with muted gains in Asian markets, but we can’t shake the feeling we’re in a sell-on-rise market! Broader markets didn’t fare better, with Midcaps (+0.5%) and Smallcaps (+0.2%) seeing limited buying. The advance-decline ratio was in favour of the bulls (3:2).

Most sectors ended higher. Auto stocks (+3.3%) were the standout show. Meanwhile, IT stocks (-0.9%) witnessed selling pressure.

In today’s issue of the Daily Rip, we break down Vedanta’s risky Rs 17,000-cr bid for Jaiprakash Associates, what the surge in gold says about a potential equities rally, trending charts and more.

Honourable Mentions:

Prime Focus was locked in a +10% upper circuit after Madhusudan Kela bought 62.5 lakh shares. Adani Power was up +4% after signing a 570  MW hydroelectric project in Bhutan.

Check out the NSE 500 heatmap:

Market
Gold Vs Nifty!

After a solid rally in 2024, gold is showing no signs of stopping. The yellow metal is up +35% YTD, easily beating the Nifty’s +5%. This means the Nifty to Gold ratio is the most oversold it’s been in five years, which has implications for your portfolio. 

FYI - gold is a ‘safe haven’ asset, which basically means it goes up a lot when there’s global uncertainty. It also means that sometimes the biggest spikes in gold come when stocks are underperforming. There are always exceptions of course but this is why it’s treated as a hedge to equities.

The Nifty-Gold ratio right now is around 2.3x. In the last two decades, every time the gap becomes large enough (say between 2.5x-2.75x) the Nifty has seen INSANE returns:

• In February 2009, the Nifty-Gold ratio was a little bigger than it is now. At that point, the Nifty went on to see +146% returns over the next 21 months.

• In August 2011, the Nifty rallied +93% over the next 43 months or 3.5 years.

• And finally, from April 2020 onwards, the benchmark index zoomed +147% over the next 19 months.

Big Picture: On average, every time the Nifty-Gold gap gets big enough, the Nifty’s average return has been 125% over the following 28 months. If you go by this, that means we’re on the verge of a big equities rally soon which makes it a great time to buy stocks. That said, a word of caution. Just because it’s happened a bunch of times in the past, doesn’t mean it will happen now. Gold could also simply correct from this point too. Use this as one metric -- among many others -- to figure out whether markets are set for a rally or not!

Specials
3 Smallcaps On Traders’ Radar

Wondering what stocks the pros are tracking? In our latest video, we reveal three smallcaps stocks that SEBI RAs have recently added to their Stocktwits watchlist. PS - stay tuned till the end for a bonus pick!