It’s just a coincidence that I’m wearing red today, as the market has been mostly painted in red, at least for most of the sectors. Today, we’re diving into some important case studies and lessons on how a complete loss of capital can happen, and how the consequences can stretch over decades

Where is the market headed?

Market Overview

So, Nifty is down 0.4%, not too much, but yes, after four days of an up move, some consolidation would have been expected and that’s what’s happened. It has not yet broken down as such, but the rest of the market did sort of appear more weak than Nifty. So the bounce is done. Whether we will bounce more towards 22,800, 900 is to be seen right now because we could not even, you know, close this gap here. There are doubts if immediately we are going to go up.

It does seem like we are again headed into this tariff situation where, you know, the Indian minister to the US has come back after some negotiation. I don’t think anything much has come out of that. So there will be narratives that will come out of that going forward here whether, you know, some sectors are going to get hit or not and to what extent by when. And the US itself is having a, you know, a debt ceiling crisis which is going to hit, I think on 14th of March. Unless the Congress there kicks the can down the road, I mean, there could be some log jam there.

Japan has hit a new high on the yield after I think 40 years. So a lot of moving parts in the world today and all this is not encouraging enough for, you know, foreigners at least to start buying India. So we have to wait for that time period and, of course, spend time till then, till that event happens.

Nifty Next 50

So Nifty Junior also down 1.5%. So this was more steeper, much more sharper. Of course, the rally also was much sharper. But again, this looks like, you know, one of those hops that we are doing essentially. After every hop, you will need to see whether we are making a new low.

If you’re making a new low, the trend is down. If we, you know, make a higher low and then if we make a higher high, then there is some chance that this trend would have been arrested. But that, so we have to bear this pain for more time.

Nifty Mid and Small Cap

1.4% on Mid Caps also. So a significant part of the big move that we saw three days back was lost today. Back to 18,000. Small caps down 1.9%, have closed this gap right here. The move also was very sharp here. Let’s see whether this was a one-off day and we kind of recover back.

The good thing about the global markets right now is that the dollar index is coming off. Trump’s executive orders so far don’t seem to be having teeth enough to destroy the market. I mean all Trump trades since Trump was, you know, expected to come into the office, a lot of transactions, a lot of trades trends that happened have now reversed and we’ll do a video on that in a day or two. So it does seem like sort of a reversion to the mean where we were prior to Trump coming in.

And if that were to sort of also be somewhat in the Indian context, then Indian market should rise actually to that extent.

Nifty Bank Overview

Bank Nifty also down 0.58%, not much but still in that range of that move.

GOLD

Gold up 0.3% in INR terms again, this is consolidating in a very tight range. Once we do have a breakout or a breakdown, the move is going to be sharp.

Advanced Declined Ratio Trends

Market breadth mostly on the sell side, you can see Nifty 500, 418 to 81. So largely most of the stocks were selling.

Nifty Heatmap

Heat maps completely red. Hindustan Levers, Tata Power was a couple of stocks in the Nifty space which went up.

Otherwise, ONGC was leading the market down along with Bajaj Auto, Titan, and Trent. In the Nifty Next Nifty space, a lot more red. Adani stocks, JSW Energy. Some stocks were flat like Dmart, Torrent Pharma, Havels, ICICI. Otherwise, it was difficult to find a stock that was not going down. DLF down 3%. Union PNB, Lodha, Chola Finance, ABB, Siemens, Zomato, IOC, TBS, Motor Knockery, all were down in a big way.

Sectoral Overview

Sectoral trends: Capital market continues to be thrashed, 3.3% today, 29% has been lost in just three months on the capital market segment. And that is the state of the capital market actually. Real estate also getting thrashed 2%. PSU banks down 1.9% along with oil and gas. Energy stocks down 1.5%. Public sector enterprise stocks, auto stocks, tourism stocks, metal stocks all down percent or more. FMCG remaining flat, everything else down. Not a very good day for the Indian market for sure.

If we see the last three months or six months, everything is red over the last one year also. Now practically everything is either flat or red. Sporadic green in defense and capital market, but they are coming down quite rapidly.

Sectors of the Day

Nifty Capital Markets Index

Capital market is making new lows. So maybe capital markets index is leading the overall market where this is the first index to hit a new low after this recent bounce also. And all these stocks are reeling under that pressure.

Story of the Day : Complete loss of capital in a decade

So here is a case study. Stock that was at 8,500 rupees in 2008, then it collapsed to 20 rupees in 2008 crisis. Then it gradually, over the next five years, recovered back to 85 rupees and it stayed there for the next few years at 85 rupees. And then, you know, it could have gone here or it could have gone there. Nowhere to know. But this is the case of Vodafone Idea and a complete loss of capital in a decade for Vodafone lovers.

This was my tweet and at some point in time, we need to make some decisions. So this was that point that I was showing you in the previous chart right here and up till here. I mean, just imagine yourself and don’t take this case as being, you know, critical of just Vodafone Idea. I’m saying let this be a test case where you consider this stock to be any other stock and assume that you are like any other investor and you are sitting with a stock here where, you know, it did what it had to do in terms of a downtrend and it recovered.

And you’ve been here, you know, six, seven years, your capital is at least not eroded. You’ve lost opportunity costs so far, that’s okay. But then now, what are you going to do with the next sort of move? So you are here and the stock starts to do this and then does this. At some point in time, you know, some decision will need to be made that you are losing capital and you lost 93% even after waiting six years, you lost 93% after that also.

So just waiting did not get you your desired result. For instance, the last one year also, and it did move up. Since COVID when markets have been moving up, you know, every donkey stock has been going up. So last one year again, 45% drop. So maybe, you know, if you were stuck in this, maybe this was a time to get out. If you have not gotten out during this period.

So the idea, not the idea, the thought process should be that there needs to be an exit plan. There needs to be an overall plan. Endless waiting does not get you the result, at least not always. And all this waiting is basically also giving you enormous pain. I mean enormous stress. You are looking at, you know, others’ portfolios which are running away. You are stuck with a stock which is 93% down. What is the point?

I mean, are you in the market to prove that, you know, you bought something at X price so it has to be X plus this when you get out? No, you have nothing to prove to the market and the market has nothing to prove to you. It is your own ego that you know, I will not book this loss because I look like a fool. Well, the market has already made a fool of you. The fact is that you just don’t want to accept it. People say if I sell this stock, then I will book a loss.

Well, my dear friend, you are already in loss. Booking it or not booking it makes no difference at all. So think about things with clarity. Just sticking to some stock because your price was here. Market doesn’t care about your price. Market says you may have bought at 100, you are a fool. I will reward somebody who’s bought it at three rupees perhaps. So let your personal ego get out of this.

Let’s see what the journey was. So it listed at 50 rupees March 07. It had a fantastic gain, went to nearly 100 rupees, a 90% gain in six months. So all was going good. You were finding great momentum here also. But then it collapsed 78% during ESG fall. If you had some proper planning, you would have gotten out somewhere here. Probably never looked at the stock again or probably would have gotten it at 60 rupees again somewhere. Then it went to 120.

So in this entire period, it was not doing anything exceptional other than other stocks. Many stocks did this at that point of time. So you may have felt that this is like any other stock and hence, you know, what can go wrong? But, you know, a lot of waiting. And once you know this lot of waiting, six, seven years of waiting has happened and now you are above the price, then you probably are hopeful for the next six, seven years at least.

So, you know, you are sitting here long consolidation, you know, expecting at least now it will move and it disappoints, right? So you are sitting here and you are expecting to go up here and it starts to disappoint. You have to get out there, you have made a commitment to yourself that okay, I’m waiting six years. But if it doesn’t perform by certain time, by certain price or by certain fundamental thesis, if you are following certain profits, certain market share, at some point in time you have to draw a line.

Even Laxman drew that line. That Sitaji, don’t go beyond this. You learn something from our scriptures. At least. Stock was down 98% in the next four years causing excessive damage and tremendous loss of capital. And today everybody can say okay, I was not this person but there are, there were millions of people who bought here also.

Okay, you, if you entered the market at, in 2021, you would have never been exposed to such a stock. But those people who have been there for a decade or so, this is real pain. And those who are lucky enough to escape from the stock, it’s good. We all need to think in terms of more systematic planning. What happens in this scenario is we become too emotionally involved.

WeekendInvesting launches – PortfolioMomentum Report