Where is the market headed?
Friday the 13th brought a bloodbath to several sections of the market today. IT stocks continue to plummet downward, motivated primarily by overseas action where ADRs listed in those markets are dropping daily.
Consequently, local markets are pricing these stocks accordingly. Severe technical patterns are emerging on the IT front that look particularly bad.
Looking at the IT index chart, there has been a drop from 40,000 just last week to 31,000. Zooming into today’s price action, the index did not even attempt to take out the morning high. The weakness is so significant that there is currently no attempt to move upward. While some stocks have certainly become oversold—meaning a dead cat bounce or a relief rally of a few percentage points could occur—there were many warning signs before this event.
For those invested in these stocks, warnings have been present for many years. While the broader market was rising, these specific stocks remained stagnant. TCS and Infosys have not made any money in the last four, five, or six years. The writing was on the wall, but many investors continued to hope for a turnaround because they are in love with the stocks. Being blinded by past performance is a major problem; just because Infosys outperformed the Nifty over the last 20 to 25 years does not mean it is always the right time to be invested.
Market Overview
The market is currently navigating a “basket of gaps.” One gap was entered today; if overseas markets perform poorly tomorrow, that gap will likely fill. There are other unfilled gaps from previous sessions, and gaps typically fill rapidly during periods of weakness. The market has given up all gains from the last seven sessions and a significant portion of the gains from the US deal. This is concerning, with the bottom sitting at 24,600. If that breaks, significant trouble could follow.
The Nifty lost 1.3%, but this selling wave is hitting all asset classes globally. The NASDAQ, gold, silver, crypto, and metals are all selling off. A critical, often overlooked element is the rising Japanese Yen. The Yen has strengthened from 157 to 152 against the USD, putting the Yen carry trade under pressure. If this continues, global weakness will likely persist.
Nifty Next 50
Elsewhere, Nifty Junior fell 1.5%, while Mid caps and Small caps both dropped 1.6%, signaling a shift in trends.
Nifty Mid and Small Cap
Bank Nifty
Bank Nifty fell 0.9% and remains relatively stable, but overall sentiment has soured.
GOLD
Gold and silver are looking for stability amid stagnation, with gold at 15,353 and silver at 246,283. Chinese markets are entering a nine-day holiday season, meaning precious metals action will be driven by the West, which could lead to further downward pressure.
SILVER
Advance Decline Ratio
The advanced decline ratio was poor, with only 65 advances against 435 declines.
Heat Maps
The heat map showed very little green. Bajaj Finance rose 2.5% as AI productivity becomes a buzzword, and Eicher Motors surprisingly gained 1.5%. However, there was nowhere to hide in the Nifty. Hindustan Unilever lost 4.3%, ITC lost 1%, and Hindalco fell 5.7%. Significant FII selling numbers are expected.
Real estate stocks in Karnataka and Andhra Pradesh are losing ground due to fears that an IT slowdown will reduce apartment demand.
Mover Of The Day
Meanwhile, Muthoot Finance reported spectacular earnings but was smashed down 11.8%, suggesting the good news was already baked into the price.
Sectoral Overview
Sectoral trends were universally down: Metals were the worst hit at 3.3%, followed by capital markets at 2.5%, and commodities, real estate, CPSE, and energy all losing 2% or more. This was a very broad-based sell-off.
Sector of the Day
Nifty Metal Index
U.S. Market
Dramatic falls occurred in the US as well. Cisco dropped 12%, while Emerson Electric, Bank of New York, Citigroup, and Walt Disney all fell over 5.5%. The NASDAQ and Russell 2000 each fell 2%, with the S&P 500 and Dow Jones down 1.5%. Apple lost 5% in a single day, wiping out $200 billion in market cap—a sum larger than the total value of Infosys.
Tweet Of The Day
A chart by Michael Batnick highlights that over the last 25 years, red dots mark times when 115 or more stocks in the S&P 500 fell at least 7% in a single day. Usually, this happens after a 34% market drawdown, but currently, the index is only 1.5% below its all-time high. This suggests the index is hiding enormous internal pain through management or money chasing a few outliers. Such events rarely happen in isolation; they often signal a series of falls.
The probability of global markets entering a tailspin has increased. If a panic wave hits, all asset classes—equities, bonds, crypto, and metals—could be sold off. Maintaining diversification and proper asset allocation is the best way to emerge as a winner.
