Moneycontrol Pro Weekender | Shifting Sands

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Dear Reader,

It’s been a wild ride. After the Union Budget’s stinging blow to markets by hiking STT rates, a wave of euphoria on the announcement of a US-India trade deal sent stocks skywards, before doubts about the fine print sent them spinning down again. The volatility was reinforced by another bout of global jitters about AI valuations. And that’s not counting the sharp swings in the gold, silver and crypto markets.

But let’s get real. As on February 4, the MSCI All-Country World Index was up 1.24 percent in US dollars this year and 17.84 percent from a year ago. For all the breast-beating, there has been little damage, so far. Nor has the overall US market been much affected—MSCI USA is down all of 1 percent this year, but still up 11.5 percent from a year ago. True, the Nasdaq and crypto, which seems to be a proxy for the most momentum-driven part of the market, are down sharply.

The current panic over AI mirrors the historic doubt that greeted the internet, railways, or electricity—a reassessment where hype meets the hard grind of implementation and profitability. This is, so far, a mild correction, albeit amplified by algorithmic trading and social media. Nevertheless, this FT story, free to read for Moneycontrol Pro subscribers, says “universal optimism about an agreed narrative is giving way to uncertainty, debate and apprehension. This suggests the near future will bring sustained volatility at best and at worst a meaningful correction”. We pointed out that by pivoting from the chatbot arms race to building specialised, agentic tools for real-world business functions, Anthropic has redefined the AI competition.

One of the reasons ascribed to the underperformance of the Indian market last year was that it couldn’t ride the AI boom. By that logic, if the AI story starts to wobble, the Indian market, being insulated, should gain.

It’s interesting that despite the India-US trade deal, the Nifty is still lower than at the beginning of the year. When the deal was announced, we had called it ‘The Daddy of All Deals’ and said it would reset the entire playbook. We had argued that the stage seemed set for the return of foreign portfolio investors. We also said it would boost competitiveness, and that exporters of auto components, solar panels and textiles would benefit.

More fundamentally, this piece argued that “for India, it was a step in a longer, carefully sequenced economic realignment to maintain strategic autonomy in a complex geopolitical arena”.

The Union Budget last Sunday had the same objective. True, it was short of fireworks, but it aimed to sharpen India's competitive edge in a fragmented, zero-sum world. By targeting capital expenditure on strategic manufacturing—semiconductors, rare earths, data centres—and rationalising customs for supply chain integration, the Budget is a direct investment in sovereign capability. In addition, we said it “will help buttress macro-economic stability further by helping to sustain the current economic growth momentum”.

To be sure, the fundamental changes in the global economy are evident in the weaponisation of trade and industrial policy, and on the flip side, for countries like India, in the pressures of maintaining sovereign autonomy. What, for example, would giving up buying Russian oil mean for our membership of BRICS and of much touted multipolarity? The markets are perhaps holding back a full-throated cheer until they see the fine print. We wrote about investor caution beneath the surface optimism.

On a more pragmatic note, this conversation indicates that the trade deal is in any case not going to create an immediate impact on earnings, although it will help specific sectors. Do take a look at our analyses of Q3 earnings under the heading ‘Stocks’ below.

But don’t the revelations from the Epstein files indicate that the rich and powerful could always get away with ignoring the rules, so what’s so new about the so-called new normal? Well, these revelations—naming figures across finance, politics, and technology—aren't shocking because they expose new corruption. We've always known power protects itself. What's changed is the abandonment of pretence. Where once scandals triggered resignations and investigations, now there's barely a shrug. The same names continue chairing boards, advising governments, and managing capital.

When elites signal that rules don't apply to them—whether in personal conduct, regulatory compliance, or geopolitical dealings—it corrodes the trust that allows capital allocation to function efficiently.

La Rochefoucauld had said: “Hypocrisy is the homage vice pays to virtue.” That homage is gone.

As we had said about Davos Man, “The metamorphosis of Davos Man isn't really a transformation—it's more like a mask coming off.... The old world-order isn't being rebuilt. It's being renegotiated by the same elites.”

Consequently, the market’s wild gyrations—between AI hype and fear, between dollar debasement and haven trades—are the direct result of this uncertain transition. Every policy shift and diplomatic handshake, which happen frequently these days, forces a rapid, volatile repricing of political risk.

Yes, the old playbooks of abundant fiscal and monetary support will continue to act as a crucial floor under markets, but they can no longer restore the lost narrative of stability.

The game is now played on an unstable board. The tremors in technology, stocks, commodities, and currencies are the market—and the world—grinding its way towards a new, more volatile equilibrium. Indeed, we don't even know whether there is an equilibrium, because the rules are written in sand.

Cheers,

Manas Chakravarty

In case you missed them, here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:

Stocks

IKS Health, Weekly Tactical Pick: Why this apparel major deserves attention, Cummins India, Berger Paints, Bharti Airtel, Tata Motors Passenger Vehicles, Transport Corporation of India, Tata Power, Solar Industries, Canara Robeco AMC, Trent, Can this old music catalogue company still drive growth? Varun Beverages, Gabriel India, Bajaj Finance, Power Grid, Aditya Birla Lifestyle Brands, NTPC, Subros, Cholamandalam Investment, Blue Star, Nestle, Concor, MTAR Technologies, Bajaj Auto, Meesho

Markets

After the rebound, what will drive rupee’s next move?

A snapshot of transmission pain for RBI

Central banks' gold buying falls 21% in 2025, slips under 1,000 tonnes

STT hike may hit derivatives volumes up to 30%; market participants flag liquidity concerns

New Fed Chair: Are risky assets fearing 'Kevinomics'?

When will discounts in bullion ETFs rationalise?

The fine print in BFSI stocks’ recovery

Motilal Oswal Wealth backs large caps for 2026, sees opportunities in defence, power and digital infrastructure

Financial Times

Martin Wolf: Reading the runes on a Warsh Fed

Where is AI showing up in the productivity data?

Scheming, joking, complaining: Moltbook’s AI agents are just like us

The stablecoin war: Wall Street vs crypto over the future of money

Economy & Policy

RBI Governor's steady hand puts credibility over celebration

RBI decides to pause, all eyes on new GDP and CPI series

Data Story: The near term effect on revenue of FTAs is significant

Credit finds its feet even as rates stay firm

What the Union Budget reveals about government priorities

Fix the delivery points to help power reforms deliver

The 16th Finance Commission’s ambitious fiscal roadmap vs the budget’s cautious glide path

India should play to its strengths in energy storage

India’s private sector must return to the shop floor

Pro Economic Tracker

Companies & sectors

Legacy automakers’ market share in electric two-wheelers surges

Automobile industry starts 2026 on a good note

Bajaj Finance, KEC International, UPL, IDFC First Bank

The coming 'golden decade' in biosimilar drugs

Tech & Startups

Budget 2026 — Turning point for transfer pricing certainty in GCCs

Geopolitics & Geoeconomics

The Eastern Window: Xi Jinping’s move to sack top generals shows divisions in military leadership

Others

What car badges tell us about the Indian consumer