Where is the market headed?
Markets across South Asia are experiencing a severe downturn today. The South Korean Kospi crashed by 8%, triggering yet another trading halt.
Remarkably, this sharp decline occurred right after Samsung announced a spectacular 19-fold increase in profits. The stock crashed despite this news because the market price had already priced in all possible upsides. This single year of profit for Samsung is equivalent to its cumulative profits over the last 30 to 40 years. This scenario highlights why relying solely on fundamentals does not always provide the right picture at the right time; investors must observe where the market price is moving and act accordingly.
As of today, the Kospi, the Japanese market, and the Chinese market are growing weaker by the day. This weakness is rubbing off on the Indian market as well, though the impact is somewhat mitigated because the Indian market does not have too many AI-related stocks. What was previously considered a weakness for the local market is now providing some relative strength.
Market Overview
Turning to the Daily Byte for the 7th of July, readers are reminded to fully review the standard disclaimer. The Nifty closed absolutely flat, down by a marginal 0.13%. Although it started strong and touched the 24,500 mark, it could not sustain those higher levels before closing.
A bloodbath is anticipated for the NASDAQ tonight, which triggers a contra trade: whenever AI stocks decline, technology services stocks tend to rise. However, these recent bounces are very nominal, and the effective overarching trend for technology services stocks remains downward.
Broader Market Indices
All other major indices ended the day in the red. The Nifty Next 50 dropped 0.6%, mid-caps fell 0.27%, small-caps declined 0.69%, and the Bank Nifty recorded a marginal loss of 0.16%. Conversely, IT stocks jumped up as AI stocks faced downward pressure.
Heat Maps
Titan stood out as an exception in the market today, gaining 2.6%, and SBI Life also registered gains. Aside from these, widespread losses were recorded across multiple sectors, including metals, Adani stocks, infrastructure, oil and gas, and real estate. The Nifty Next 50 was heavily filled with losses, and capital goods, commodities, and defense stocks were all down, leaving very localized green patches across the board.
Top Gainers & Losers
Sectoral Overview
In sectoral trends, the IT sector was the primary gainer, rising 2.43%. While this currently looks like a dead cat bounce, the frequency of these small, recent bounces suggests the sector might be at or near a temporary bottom. Tourism also ticked up by 0.75%, while many other sectors remained completely flat.
The largest sectoral losses were concentrated in metals, capital markets, real estate, and defense, which shed between 1% and 1.5%.
Sector of the Day
Nifty IT Index
Looking at the IT space over the last four sessions, the index has rallied from roughly 25,500 to nearly 28,000, marking a solid 5% jump. This upward momentum in IT is being powered by stocks like Persistent, LTIMindtree, Mphasis, Infosys, and HCL Tech.
U.S. Market Update
Reflecting on the previous session, the US markets performed well. The S&P 500 rose 0.7%, the Dow Jones gained a quarter of a percent, the NASDAQ showed a very strong performance of 1.2%, and the Russell index ticked up 0.4%. The top gainers in the US market included Western Digital, Tesla, AMD, Astera Labs, and Seagate Technology, with gains ranging from 5.8% to 7.1%.
Meanwhile, the top losers featured Rocket Lab, O’Reilly Automotive, Keurig Dr Pepper, Honeywell Aerospace, and Mondelez International. While some of these US equities might be a part of the weekend investing US stock strategy, these mentions are strictly for informational purposes and are certainly not recommendations.
The performance of the NASDAQ 100 warrants close observation tonight. Yesterday saw a highly green session for the AI and semiconductor blocks, alongside strong performances from Tesla, Palantir, and Meta. Today is expected to be a bit different, and more than yesterday’s gains will likely be nullified. This continuous yo-yoing in the market perhaps indicates that the NASDAQ is forming some kind of a temporary top, though market movements can always prove otherwise.
Tweet Of The Day
In the tweet of the day segment, the focus returns to the Samsung profit story. Samsung’s recent annual profit exceeded its cumulative profits from the last 40 years combined, showcasing the amazing year a stock can experience. The powerful price-based action was clearly visible as the stock price moved multifold from the beginning of the year leading up to this point.
Following the actual news announcement, there were no further gains, in fact, massive losses occurred. However, a significant amount of gain could have been captured by following the price action leading up to the event. This serves as a vital market lesson.
