It has been a bloody month, and even on the last day, the market didn’t spare the investors. Almost all sub-segments of the market were hit hard, with IT stocks leading the charge down.

President Trump has once again made headlines by boosting tariff talks. The fear that these tariffs might be implemented very soon is now being discounted by the market. In other news, India’s GDP for the quarter has been released at 6.2%, which, while not great, at least met expectations and didn’t fall below them.

From a behavioral perspective, we are beginning to see people panic or lose hope in the market. Personally, I’ve been receiving messages from friends and family—who typically never discuss stocks or the market—expressing their concerns about how bad things are right now. This signals to me that we may be entering the phase of the “last capitulation.” While it might not have happened yet, and no one can truly predict the bottom, it’s an indication that people are losing confidence.

I remember back in 2008, when the market fell from 6200 to around 4500, I thought a lot of damage had already been done, and that could potentially be the bottom. But as we all know, the market eventually bottomed at 2200, so it’s important to never say never. The possibility of deeper cuts remains, but at the same time, there is always hope that today might have been the bottom.

If you’re following your planned strategy, there’s not much else you can do. Trying to pinpoint the market’s bottom is a futile exercise. Ideally, if you’re sticking to your strategy, you shouldn’t be overly concerned about these movements. However, because human emotions are constantly in play and we are bombarded with data, even if we don’t have an immediate decision point or action to take, it still impacts the average investor.

So, my advice remains the same: don’t put too much emphasis on daily market movements. Yes, there are painful periods, but also remember the gainful periods we’ve enjoyed in the past. Nature itself is cyclical, with seasons changing and everything following a cycle. The market behaves similarly. As long-term investors, these downturns are part of the game, and perseverance is key.

If you’re a nimble-footed trader, you may be able to avoid these downturns or even benefit from them. But as a long-term investor, you have to bear the ups and downs. That’s just how it works.

Where is the market headed?

Market Overview

Now, looking at the market data, we’re seeing a major downturn. The market is now very close to the 22,000 mark, with the low for the day being 22,104—down 1.86%. The RSI shows that we are oversold, almost as if the market has been hit by a crisis like Covid. A bounce is due, and it was expected yesterday as well, but the market didn’t cooperate.

Nifty Next 50

The Nifty Junior index was absolutely hammered, falling 2.9% for the day. It has dropped from nearly 78,000 to 57,000, representing a massive cut of more than 25%

Nifty Mid and Small Cap

Mid-cap stocks were down 2.35%, and small-cap stocks were also down 2.5%. There was hardly any pullback from the bottom.

Nifty Bank Overview

The Bank Nifty fell by 0.82%, but it has not yet broken the January lows and had a reasonable pullback during the day.

GOLD

Gold prices are also on the decline, and with the US markets shaken, cryptocurrencies are falling quickly as well. There seems to be a widespread wave of profit-taking and selling happening across the board. Even the Hang Seng Index, which had been performing well, dropped by 4%. Gold, priced in Indian rupees, is also down 0.3%, although it remains relatively stable, hovering around the 85,000 mark.

Advanced Declined Ratio Trends

Looking at market breadth, the numbers are heavily skewed in favor of the bears. Of the Nifty 500 stocks, 430 were declining while just 69 were gaining. Stocks that have managed to resist this fall are likely at levels of strong support. It’s a good idea to keep an eye on stocks that have stopped declining in recent days, as they show relative strength.

Nifty Heatmap

HDFC Bank is doing its best to hold the Nifty together, but IT stocks like TCS, Infosys, HCL Tech, Wipro, and Tech Mahindra are all down by 3-6%. State Bank of India, Kotak Bank, Bajaj Twins, and Reliance are also down. Bharti Airtel dropped nearly 5%. It almost feels like someone is liquidating their portfolio. Stocks like Maruti, Titan, Aisha Motors, Mahindra, and Bajaj Auto are all down 3-5%. Even strong names like Hindustan Unilever and Nestle saw declines of 4%. Foreign institutional investors (FIIs) are likely to show some significant numbers later today, but for now, nothing seems to be spared.

The Nifty Next 50 index has fared even worse, with Bajaj Holding down 4%, IRFC down 6%, and heavy losses in stocks like Lodha, DLF, Adani Group, and others. Even stocks like TVS Motors, Zomato, and Dmart saw sharp declines, while Indigo and JSW Energy were the only stocks managing some green.

Sectoral Overview

Looking at sectoral trends, it’s all red across the board. The IT sector is down 4.2%, while capital markets have taken a hit of 4.1%. The capital markets sector is now leading the downturn, having fallen 9.4% in the last three months. Many sectors have seen declines of 20% or more, including real estate, energy, and infrastructure. Over the past six months, no sector has performed well, and over the last year, only capital markets and defense stocks showed strong performance. Most other sectors are either in single-digit green or negative returns.

When most sectors are in the red for the past year, it’s a sign that the market may be nearing some sort of bottom or plateau. It may not immediately start going up, but once the market reaches its yearly lows, it’s unlikely to continue falling to levels seen in the past two or three years. These cuts are extreme, and after a breakout in December, the market seemed poised to go higher with Trump’s involvement, but it has now collapsed in a significant way.

So, these are certainly challenging times, but as always, patience and strategy will be key for long-term investors.

Sectors of the Day

Nifty IT Index

We’re back to the levels seen in July 24th, and the drop has been incredibly sharp, particularly in IT stocks like Tech Mahindra, Wipro, Infosys, and TCS.

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