Where is the market headed?
An interesting observation recently shared by Mindset Money highlights a fascinating trend regarding Microsoft. Over the last four odd years, the stock of Microsoft has not really gone anywhere, moving up by only 4%. In stark contrast, the earnings of Microsoft have essentially doubled during this exact same period. This means Microsoft is nearly twice as profitable as it was at the end of 2021, yet it is valued the same.
This illustrates a major problem that a lot of investors face, where the earnings and the price movement of their stock are not in sync due to a distinct lag effect. A very detailed video on this phenomenon will be released later today, so please tune into that.
Market Overview
Shifting focus to the markets for the day, today marks the 30th of June, the end of the month. It seems nobody was looking forward to extending this month, as June has been highly range-bound. Hopefully, the end of this month brings some new hope. Looking at the market behavior, the entire month of June, especially since the start of the month, has felt like a sort of a roller coaster without really getting anywhere. Nifty was down today as well by 0.34%, closing at the 23865 level.
Broader Market Indices
The broader market, however, performed slightly better. Nifty Next 50 went up 0.1%, mid caps advanced 0.4%, and small caps gained 0.6%, while Nifty Bank lost 0.32%.
GOLD
Meanwhile, gold is trying to find its feet, remaining right where it was yesterday with a 0.38% increase.
Crude Oil
Crude oil also seems to have found a bottom somewhere near 72 to 74 dollars, showing little reaction to news from the US or Iran regarding whether their conciliatory talks are moving forward or not.
Heat Maps
The Nifty heat map presented a very mixed picture. Good gains were visible in Maruti, Titan, Adani stocks, and Bajaj Finance. Banks remained kind of flattish to down. However, a major red corner was observed in the IT space, where TCS, HCL Tech, Infosys, and Wipro lost almost 3% each. Eicher Motors also lost 4.75%.
On the positive side, Tata Motors actually gained ground on news that the Delhi government EV policy is going to favor EVs, which benefits Tata Motors since they have a good EV collection. Surprisingly, Mahindra did not participate today. Maruti was up on a call that passenger vehicles will see good demand going forward, even though the Delhi news acts as a dampener for Maruti because they do not have much of an EV portfolio.
Moving into the Nifty Next 50 space, good gains were recorded in Cummins, Siemens, Mazagon Dock, Hindustan Zinc, and Solar Industries, which did really well. Real estate stocks also enjoyed some gains, while Adani Power, Motherson, and ABB witnessed some profit booking along with LTIMindtree.
Top Gainers & Losers
On the technology and broader gainer side, top performers included Ola Electric. The new Delhi policy unleashed the bulls in Ola Electric Mobility, pushing it up by 8%. Cochin Shipyard went up 5.6%, Transformer & Rectifiers rose 5%, and Balrampur Chini and Maruti Suzuki were among the other gainers.
Conversely, Schneider Electric faced profit booking after yesterday’s huge run-up. KPIT Tech and Eicher Motors were down, with Eicher Motors impacted by the fact that it does not have an EV two-wheeler, especially since no two-wheelers will be registered in coming years in Delhi unless they are EVs, making it a notable dampener. ZF Commercial Vehicle Control was also down 4.4%, and Tata Tech, which has always been falling, fell more at 4.32% for the day.
Sectoral Overview
Within the sectors, notable gains came from defense, picking up by 1.3% after a long time. Real estate also went up 1.3%, tourism climbed 1%, and MNCs rose 0.89%. The big falling bar came heavily from Nifty IT. Checking the Nifty IT index reveals that over three months it has lost 18%, and over the last one year it is now down 30%. This performance forces investors to question why, if they are holding IT stocks, they have been holding on. Is it just hope, or is it more than that? Most trend-following strategies have completely avoided touching it in the last one year.
Sector of the Day
Nifty IT Index
LTIMindtree, Infosys, TCS, Wipro, and HCL Tech are all losing ground. In fact, the biggest IT services companies in the world, such as Cognizant and Accenture, are losing ground very, very rapidly.
U.S. Market Updates
In the previous session, the US markets saw a good gain in the NASDAQ of 2.25%. Once again, the NASDAQ is coming back, proving it has nine lives and just doesn’t go down. The S&P 500 went up 1% and the Dow Jones rose 0.6%, while the Russell was completely flat for the day yesterday.
MicroStrategy surged up 12%, with KLA Corp, Western Digital, Applied Materials, and Axon Enterprise emerging as some of the big gainers of yesterday. On the flip side, Copart, Honeywell, T-Mobile, Cognizant, and IDEXX Laboratories were among the big losers of the NASDAQ 100. Some of these stocks could easily be part of the weekend investing U.S. stock strategy.
Looking closer at the NASDAQ 100 heat map, big gains were prominent. Tesla, Applied Materials, Lam Research, and Google all moved up very nicely, with Google rising 4.5% to 4.8%. Nvidia and Broadcom posted good gains, as did ASML and several other pockets right across the tech space. Meanwhile, Walmart and Costco lost some ground.
Tweet Of The Day
In the tweet of the day segment, a direct comparison was made between Cognizant, represented by the blue line over the last five odd years since the COVID bottom, or nearly six years now, and Accenture, shown as the green line. These are two of the largest IT services companies globally. Overlaying the Infosys chart in dollar terms, rather than nominal INR terms, allows for an accurate comparison with these two global charts. Interestingly, Indian IT has still outperformed global IT services companies by a wide margin so far.
Now, the critical question for investors is whether these global companies have truly bottomed out or if they are still going down, and whether Infosys will catch up or if this remains a very blind alley where things could go south a lot more. This is something that investors must figure out regarding Infosys. If an investor were riding this trend correctly, they would have gotten out somewhere early and avoided this entire stagnant period.
Perhaps they would have hit a false breakout, bought into it, sold out quickly, and then never looked at Infosys again over the last year and a half. It is highly important to avoid keeping losers in a portfolio. Having them simply pulls down investor confidence and drags down the overall portfolio. Staying strictly with the winners actually makes a lot more sense for a lot of folks.
