Where is the market headed?
A dramatic move unfolded across several banking stocks in today’s market session. Axis Bank plunged by 5.5%, while HDFC Bank experienced a decline of over 5%. Other private lenders also faced severe selling pressure, with AU Small Finance Bank dropping 3.5%, alongside noticeable hits to Fino Payments Bank and Yes Bank, as most private sector banks were hammered hard.
This sharp decline followed the release of HDFC Bank’s latest financial results, which the market did not receive well. Consequently, investor capital immediately rotated toward Public Sector Undertaking (PSU) banks. Institutions such as Punjab National Bank, Union Bank of India, Indian Overseas Bank, and Indian Bank surged higher, climbing between 3% and 5%.
This movement highlights a sudden perception shift regarding private versus PSU banks. Looking at longer-term charts, private banks have consistently trailed their public sector counterparts. PSU banks have essentially experienced a rebirth over the last few years, whereas private banks have remained sluggish, potentially due to increasing global interest rates and ongoing pressure on banking assets.
Going forward, PSU banks might receive subsidies or policy support to maintain their margins, while private banks may have to bear the brunt of these pressures directly. This underlying theme appears to be driving the current preference for PSU banks.
Market Overview
On the commodity front, pressure persisted without any letup in energy markets. Brent crude oil touched nearly $92 per barrel before softening post-noon to around $87.88. This easing in oil prices allowed the broader market to regain some ground.
Overall, the Nifty index managed to limit its losses, closing down by 0.39%, primarily dragged lower by heavyweights in the banking space. Bank Nifty fell by 0.98%, while Nifty dipped 0.4%.
Major Market indices
Conversely, the rest of the market remained mildly in the green, with small caps ending flat, mid caps gaining half a percent, and the Nifty Next 50 advancing by 0.88%.
Heat Maps
The market heatmap displayed prominent red marks across major private lenders, including HDFC Bank, Axis Bank, and Kotak Mahindra Bank, all of which were thrashed badly, alongside Maruti, which gave up almost 2%. Nevertheless, broader participation remained reasonably strong, particularly within the Nifty Next 50 heatmap, where PSU banks, Adani stocks, commodity names, and pharma companies posted solid performance.
Top Gainers & Losers
Sectoral Overview
From a sectoral standpoint, private banks dropped more than 2%, while PSU banks gained over 2.5%. Most other sectors remained largely unchanged, leaving the broader market in a state of limbo where PSU banks and pharma stocks stood out as the sole drivers of positive momentum.
Technical charts indicate that PSU banks may have bottomed out and are now eyeing higher targets. In contrast, while private banks performed well during the first half of June, their momentum stagnated before culminating in today’s widespread drop.
Sector of the Day
Nifty Private Bank Index
Nifty PSU Bank Index
U.S. Market Update
Global cues were equally weak following a broad sell-off in US markets during the previous session. The Nasdaq was thrashed down 1.5%, while the S&P 500 dropped 1%. Among individual US equities, Seagate Technology, Lumentum Holdings, Diamondback Energy, and Western Digital managed gains of 2% to 5%.
However, severe losses were recorded elsewhere: Intuitive Surgical took a heavy beating down 14%, Cadence Design Systems slipped 9.5%, and Synopsys, Netflix, and Arista or Exxon Enterprise dropped 5% to 7%. Some of these names feature in active US weekend investing strategies, adding to the observed volatility.
The NASDAQ transformed into a sea of red, marked by massive capital erosion in mega-cap tech, with top names losing over $1.3 trillion to $1.4 trillion from their peak values. Major tech heavyweights including Netflix, Microsoft, Meta, Google, Nvidia, and the rest of the Magnificent Seven posted widespread losses.
US market sentiment was further weighed down by concerns over an intensifying geopolitical war situation. Reports confirmed on-ground casualties among US soldiers, with two to three casualties reported yesterday, escalating geopolitical tension. However, during the second half of the trading day, market rumors emerged suggesting Iran might still be open to negotiations, which triggered a rapid drop in Brent crude prices by $4 to $5 per barrel.
Tweet Of The Day
A notable tweet of the day focused on HT Media as a classic case study on narrative versus price action. Back in 2005, when HT Media launched its Initial Public Offering (IPO), there was significant excitement and hype surrounding its majority market share and strong readership base.
The prevailing narrative suggested that as India’s economy expanded and education levels rose, newspaper circulation would grow steadily as more citizens wanted to read daily news. The IPO was marketed with immense promise and listed near 128 rupees. However, 20 to 21 years later, the stock sits at approximately 28 rupees.
This stark reality illustrates how price action provides far clearer guidance than corporate narratives. While narratives are crafted to sell investments, price action reveals actual entry and exit points. Under a disciplined trend-following strategy, an investor might have participated in the IPO but exited around 120 to 130 rupees on the way down, avoiding decades of underperformance. Over the last two decades, many investors poured significant capital into the stock expecting a turnaround that never materialized. This lesson applies beyond HT Media to many stocks sold on compelling narratives where the underlying price moves in the opposite direction.
