Where is the market headed?
It was yet another day where the markets failed to gain traction. In fact, as the session progressed, the indices continued to slip, with the Nifty forming a bearish engulfing pattern by the end of the day.
Market Overview
Nifty continues to remain sluggish, showing no signs of recovery after nearly eight sessions in the doldrums. The index has been stuck in a narrow 150-point range, closing 0.63% lower today.
Toward the end of the session or just after the UK-India Free Trade Agreement was signed, which could potentially provide a fillip to market sentiment tomorrow. However, that remains to be seen. Overall, the markets remain lacklustre, with little to look forward to in the immediate term.
Nifty Next 50
Nifty Junior also remained subdued, ending the day down by 0.23%, with no significant movement in either direction.
Nifty Mid and Small Cap
Mid-caps declined by 0.42%, still holding near the upper end of the range without a breakout.
Small-caps fell 0.66%, marking the sixth consecutive session where the close was lower than the open.
Bank Nifty
Bank Nifty slipped 0.25%.
GOLD
Gold was sharply down, failing in its third or fourth attempt to break above the ₹10,000 mark. The metal seems to be entering a phase of further consolidation before any meaningful move.
Advance Decline Ratio
Declines continued to rise until midday before flattening out, while advances followed the opposite trajectory. Overall, bears held the upper hand, with 327 stocks declining compared to 171 advancing.
Heat Maps
The Nifty heat map was mostly red today, reflecting broad market weakness. Nestle led the losses, down 5.3% on flattish results. When high P/E stocks show modest growth, the market typically reacts sharply, a long-standing trend. Trent fell nearly 4%, Tech Mahindra dropped 3%, and Reliance extended its losing streak to four sessions, down 1.5%. Major banks like State Bank, Kotak Bank, and Axis Bank also declined, along with SBI Life, the Bajaj twins, Coal India, Bajaj Auto, Hindustan Unilever, ITC, and NTPC, possibly impacted by stronger FII selling.
On the upside, Eicher Motors rose 3.6%, despite being one of the least favoured results, and Tata Motors gained 1.5%. In the Nifty Next 50, PSU banks led the charge with Bank of Baroda, PNB, and Canara Bank rising nearly 5%, followed by PFC and REC. Motherson and Jindal Steel also posted gains of 4% and 2% respectively.
However, losses were widespread otherwise, with stocks like DLF, ICICIGI, Bajaj Housing, Adani Ent, Indigo, LTIM, D-Mart, Vedanta, Havells, and Info Edge (Naukri) down around a percent.
Sectoral Overview
Only one sector performed well today: PSU Banks. However, this gain comes after a sharp decline just two days ago, making the movement appear more like a rebound than a sustained rally. The sector remains highly volatile, and despite today’s positive move, PSU Banks are still down about 1% over the past week.
IT stocks emerged as the weakest segment of the market. The Nifty IT index declined by 2.2% today, continuing a downward trend that has lasted over a year. On a 12-month basis, IT stocks are down 10%, and the drop has accelerated over the past six months, with a steep 17% fall since what many perceive as a regime change in the United States. Clearly, the sector remains under persistent selling pressure.
Other sectors also struggled. The FMCG space, led by Nestle, declined by 1%, while Real Estate stocks, dragged by DLF, also ended the day down 1%. MNC stocks fell by 0.96%, and sectors like Oil & Gas, Energy, and Central PSUs saw continued weakness. There was also some profit booking in Financial Services, contributing to the overall market pressure.
The only other area of mild strength was Pharma, which managed to register a 0.5% uptick. However, this minor gain was not enough to offset the broader market weakness. Overall, the market saw a lack of sectoral leadership, with only pharma and a rebounding PSU Bank segment showing any resilience amid widespread declines.
Sector of the Day
Nifty PSU Bank Index
In the PSU banking space, the index has shown a notable recovery after enduring four consecutive days of heavy losses. The past two sessions have seen a rebound, pushing the index back above its 40-day moving average, a technically significant level that may offer support going forward.
Among the notable gainers were Canara Bank, Indian Bank, Bank of Baroda, Bank of Maharashtra, and Bank of India, all contributing to the sector’s bounce. While the broader market remains under pressure, the PSU Bank Index is still looking reasonably strong on a relative basis, especially considering its ability to recover key technical levels in a weak market environment.
Nifty IT Index
IT stocks have been hemorrhaging since the beginning of July, showing a sharp and continuous decline. A gap that had formed earlier on the chart was expected to fill and now, that gap is almost entirely closed. The market will be watching closely to see whether IT stocks pause and consolidate at current levels or continue their descent toward the next visible gap, which lies near the 34,000 mark on the index.
At present, the trend resembles a free fall, with no immediate signs of reversal. Some of the major laggards contributing to this weakness include Coforge, Persistent Systems, Tech Mahindra, Emphasis, and LTI Mindtree. These names have borne the brunt of the selling pressure, reflecting the sector’s ongoing struggle.
Story of the Day: The One Habit Wrecking Your Portfolio
One of the most overlooked yet damaging habits investors fall into is resisting systems—particularly rule-based or automated strategies. Many investors shy away from automation, preferring manual control and discretion. The hesitation often stems from a belief that human judgment is superior to algorithms or structured logic. This fear of giving up control leads to overriding investment strategies, even when those systems are historically effective.
This resistance plays out in various ways. For example, a strategy may suggest buying five stocks, but the investor buys only four, skipping one based on personal bias. Or a strategy may underperform in the short term, prompting an investor to abandon it despite strong long-term performance data. Narratives and market commentary often influence these decisions. Human instincts and media noise can seem more convincing than cold, logical signals, especially when a rule suggests buying a stock that has already rallied significantly.
Daily life provides relatable examples of this mindset. Many people hesitate to enable autopay for SIPs, subscriptions, or bill payments, fearing errors or loss of control, even though automation would save time and money. Similarly, skepticism persists toward self-driving cars despite their safety records. These behaviors highlight a core belief: manual control feels safer, even if it’s less efficient.
In investing, this distrust of automation often manifests in overriding strategy signals. For instance, a momentum strategy may generate a buy signal on a stock that’s already doubled. An investor might reject the trade, reasoning that the stock has run its course. Likewise, a sell signal might be ignored if the investor personally likes the company or its products, leading to prolonged holding during poor performance.
A notable example is Indian Energy Exchange, which rose 17x in 16 months, but when the system issued a sell signal, many investors held on, expecting further gains (see image above). The stock then moved sideways for years, causing frustration and missed opportunities.
Another common mistake is cherry-picking from model portfolios. A system may recommend buying 20 stocks, but an investor may exclude a few based on perception, past performance, or discomfort with sectors like PSU banks or microcaps.
In 2023, many skipped government-owned stocks such as HAL, BEL, and BEML—deemed speculative or underperforming. Yet these were the very stocks that turned out to be multibagger (see image above). The system didn’t pick them based on stories but on price action and relative strength. Ignoring such picks weakened portfolio performance and defeated the purpose of using a system.
Pausing strategy execution due to news or fear is another pitfall. Headlines like war, recession, or pandemics prompt many to delay entries, exits, or rebalancing. During the Russia-Ukraine conflict, numerous investors paused momentum strategies fearing a crash. However, the market dipped briefly and then rallied 60% over the next three years (see image below).
Similarly, during the COVID-19 crash in 2020, many exited the markets at the bottom and could not re-enter during the sharp recovery, missing substantial gains (see image below).
In 2008–09, during the global financial crisis, investors who waited for stability ended up buying back in after markets had already rebounded (see image below).
These examples underscore a crucial truth: overriding or pausing systems based on news, fear, or personal judgment often results in lost returns. Rule-based systems don’t react to headlines, they react to price. By trying to out-think the system, investors allow emotion to override logic. Waiting for certainty only leads to entering late when the market has already moved and risks are higher.
The core takeaway is this: systems work best when they are left undisturbed. Constant interference, even if minor, chips away at long-term performance. The urge to control outcomes is emotional, not logical. Investors should redirect that need for control elsewhere and trust the rules they have chosen to follow. Switching strategies frequently or customizing them based on comfort levels undermines the entire purpose of using a disciplined, data-driven approach.
Momentum investing, for example, thrives on data not narratives or headlines. Price reflects all known information faster than humans can react. Trusting the signal especially when it feels uncomfortable is often the smarter move. The job of the investor is not to constantly pilot every decision but to trust the autopilot they have chosen. Just as one doesn’t direct a bus driver or aircraft pilot mid-journey, one should let the investment system do its job.
Disciplined systems that are followed without ego or interference tend to outperform inconsistent human intuition. This truth is evident in countless portfolios. Many investors miss out on significant wealth creation because they cannot relinquish control or overcome fear. That one habit: second-guessing the system is often the reason long-term compounding fails to work its magic.
Do check out our video on The Biggest enemy of Your Portfolio to learn more.
