Hello and welcome to the Weekend Investing Daily Bite for the 4th of September! We kicked off with a sharp gap-down opening today, triggered by a deep cut in AI and tech stocks in the US markets. This could potentially mark an interim top for AI stocks, with global repercussions being felt, including a significant 4% drop in the Japanese market. However, the Indian market showed resilience, bouncing back from the initial plunge

So, has AI really peaked? That’s the big question we’re tackling today. I’ll walk you through some key charts and narratives that have been shaping this discussion and explore how this might impact the Indian marke

Market Overview

Where is the market headed? The market opened exactly where the previous top was. So if you are appreciative of any technicals in the market, please appreciate why we opened exactly here. You know, why not lower? Why not higher? Because this was the support point of the market. The previous highs become the support for the next down move, and only once they are broken down will the further fall start.

So now, today’s low becomes the formidable support below which, of course, there may be a very quick climb down to maybe this moving average at 24,650. But for now, markets have said that whenever there is a gap down and the market continuously, more or less during the day, moves up, it means that the market does not want to stay down, at least for now, and there is a bounce. Money that is sitting on the sidelines has come in and bought the market, and we have again closed not too far from the all-time highs—0.32% down on the Nifty, but not so bad if you look at it in the entire context.

Nifty Next 50

A similar top also provided support for Nifty Junior, and it actually closed at the same point where we were yesterday. So no loss on the Nifty Junior.

Nifty Mid and Small Cap

Mid-caps gapped down and recovered, only 0.08% down. So the broader market has actually recovered better than the Nifty.

And this external shock that came through after last night’s US markets has very well been absorbed by the market. Small caps—this is the surprising part—immediately after opening gap down, small caps in the first hour itself made a huge rally upwards and have actually closed at an all-time high at 18,320. This is a very, very clear sign that there is no weakness as of now in the small-cap space. That is extremely encouraging in the markets.

Nifty Bank Overview

Bank Nifty also closed only 0.56% down, taking support again at this moving average that we’ve plotted, and within the range of yesterday’s move. So overall, no damage done, I would say. Some stocks may have gone up or down, but effectively, no damage done. Even the advance-decline ratio is almost even. We have not had such an even day in the last five sessions—252 to 246 and two unchanged. It can’t get more even than that.

Advanced Declined Ratio Trends

In terms of FIIs, as I was mentioning two days back, in the last ten sessions there have been only two small outflow FII numbers. This is definitely a trend that you can see. In fact, DII buying has slowed down. We only had 400 crores on August 28, 300 crores on September 2. FII and DII combined numbers are becoming almost positive for, you know, nine out of ten days, and that is a good positive number there. So institutional buying in the market is very much intact, and of course, we also have the domestic buying going on.

From that perspective, today’s numbers for September 4 will be something I’ll be keen to watch—how both the institutional investors have reacted.

Nifty Heatmap

The heat map was mostly red, but defensive stocks tried to make up for the falls. You had some deep cuts in energy—ONGC, Coal India—and some cuts in IT stocks following Nasdaq, as well as some cuts in the banking space—ICICI Bank, SBI, Axis Bank. Wipro was down 3%, Mahindra was down 1.2%, Hindalco, Tata Steel also down.

Hindustan Lever, Asian Paints, Grasim—these were a couple of stocks along with Sun Pharma that held the market up on the Nifty. The Nifty Next 50 had more green, so Ambuja Cement, D-Mart, Trent, Dabur, VBL, Adani Green, Bajaj Holdings, ICICI General Insurance, Berger Paints—these were some of the stocks that did really well.

PSU banks lost ground—Bank of Baroda, PNB, Canara Bank. Then you also had some power stocks losing—Adani Power, Tata Power, ABB also down. Zomato has been consistently going down in the last many sessions, but overall, a good comeback by the Nifty Next 50 in the second half of the day.

Sectoral Overview

PSU banks overall were down 1.7%, leading the market down. IT stocks down 0.9%, public sector enterprise stocks also down 0.8%, metal stocks also down 0.8%, energy, private banks, and auto also down. Similarly, pharma, real estate, and FMCG eked out small gains.

Sectors of the Day

Nifty Pharma Index

Pharma, notably, is now nearly the second-best gainer in the one-month and three-month categories—up 5.9% for one month and 24% for three months. So pharma is emerging as a good candidate in the last three months. In terms of the pharma index, you can see that the pharma index really broke out in June, and that rally has continued regardless of where the market is. If you compare pharma versus other sectors, the pharma index has gone way beyond other sectors since the election day, which was here—it’s not even visible on this chart. All other charts are still hovering around that election high.

Biocon was up smartly by 5%, Granules by 2.7%, Sanofi, Natco Pharma, and Lupin were major gainers in the pharma space, even on a down day. So whenever you have stocks that are hitting new highs or making good gains on a general market down day, that is the sort of strength in the market that is visible to you.

Stocks of the Day

CCL Products

CCL Products was up 15% today. This is one major stock that was up, and in terms of overall performance, this stock has just been galloping up in the last many years. Of course, from COVID levels of nearly ₹100, it has gone up 8x and continues to go up at a new all-time high. A new all-time high on a day when the market fell is always a good place to be.

Story of the Day: Has AI really Peaked?

I’m sure many smart IT folks who follow our channel will be able to answer this question better from an industry point of view. I have tried to ask many folks who are in the technology industry who are dealing with AI, and they all say that while AI technology is progressing very fast, we are unable to really make use cases for the end consumer. So from that perspective, the generation of revenue by using AI seems to be falling a little behind. That is the narrative going on.

Yesterday night, Nvidia, which is in the leadership position right now in global markets, suffered a single-day fall of $279 billion. Just for a second, think about that number—$279 billion. India’s forex reserve is just double that. So Nvidia lost that kind of market cap in just one session, and this has become a record—the largest market cap loss of any company in just one session in the history of markets. Nvidia was very near $3 trillion very, very recently, and right now, it is bleeding a bit. It had fantastic gains, but this chart from Creative Planning shows the largest single-day gain or loss of any company in the history of the last 24 years. And you can see that $279 billion is the single largest decline of any company in history.

This is gaining a lot of narrative that, post-results, Nvidia didn’t drop as much, but yesterday night, there was some talk about the government looking at the monopolistic part that Nvidia has been identified with. There may be more investigation or more clarifications needed by the company to the competition commission and so on. So, the reason may not be so applicable, but maybe the stock was looking for a reason to correct, and that reason came through today. It gapped down and went down almost 9.5% yesterday.

Whenever there is a strong market rally like we’ve had in the past, leadership stocks are watched closely. Whenever those leadership stocks fall, it is a cue that the market is taking a rest now, and some other leadership may be needed. Nvidia topped out somewhere in June, then there was a letdown, then it recovered back, and now it is falling again. If it does fall below, let’s say, $90 here, it may become like a range-bound situation, somewhat like what Tesla did a couple of years ago. Tesla had a huge move, and then it just became a stock stuck in a range.

There is a chip index, the Philadelphia Semiconductor Index. This too has topped out some time back and is now actually looking like a head-and-shoulders pattern. We will know if it breaks 4,200 here, and if it does, that will be the end of the semiconductor

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