A Powerful Lesson for Investors

On Friday, markets saw a sharp fall in the last hour and a half, almost like a capitulation where the weakest hands exited their positions. This came after the news of an additional 25% tariff from President Trump last week. Many traders expected Monday to open with a huge gap down and weakness across the board, especially with Nifty sitting near a large gap just below Friday’s close. However, the opposite happened.

The market bounced strongly today instead of falling. This is a reminder that markets often do the opposite of what people expect. Even when nothing positive seems to be happening, it does not mean good news will not come.

• Today’s bounce recovered almost all of Friday’s fall, with Nifty up 0.9%.

• Nifty Junior was up 1.17%, Midcaps was up 0.65% & Small caps was up 0.45%.

• Bank Nifty was up 0.92%. Investors may be adjusting to the tariff news, hoping for some relief by the end of August.

• Gold fell 1% today, as stable conditions usually push gold prices down.

Other Market Triggers

• Tata Motors rose 3% after maintaining its FY26 guidance for Jaguar Land Rover.

• SBI was up 2.38% after strong results, showing potential for a breakout.

What to watch next ?

• We may have been in a consolidation phase since last September, nearing a full year now. In the past, such periods have lasted between 12 and 18 months. This means a major part of the consolidation could already be over. The market will not announce its recovery; it will move up quickly, and many will realize too late that they missed the rally.

• Another notable update came from the RBI, allowing banks to set their own minimum balances. ICICI Bank set it at ₹50,000, which could boost its free float income significantly. This move might lead to a split between premium banks and mass-market banks over time.

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What To Read This Week ?

A Cautionary Tale of Recency Bias

Today, we're diving into a powerful lesson from market history that's as relevant now as it ever was. We'll explore the story of the Noida Toll Bridge Company and the critical takeaways for every investor.

The Allure of a "Safe" Investment

For a decade, from roughly 2005 to 2015, the Noida Toll Bridge Company was seen by many as a stable, almost foolproof investment. The company operated the primary bridge connecting Delhi and Noida, a route with ever-increasing traffic. The stock price was consistent, hovering between ₹15 and ₹30.

What was particularly attractive was the company's generous dividend yield, often providing a double-digit return. This created a sense of security, leading many investors to believe they had found a reliable source of passive income for their retirement. The assumption was that traffic and tolls would continue to rise indefinitely, guaranteeing a steady stream of dividends.

The Inevitable Change

The "forever" story came to a dramatic halt in 2016. The Supreme Court intervened, ruling that the company had already collected more toll revenue than was originally stipulated in its contract. The court ordered that the bridge be made toll-free. This single event was catastrophic for the company's business model. The stock price, which had been so stable, plummeted from nearly ₹30 to just ₹2.

The company's primary source of revenue was eliminated overnight, and with it, the "safe" investment vanished. While there were brief moments of hope later on, they ultimately proved to be short-lived, with the stock eventually crashing again.

This story is a stark reminder of the dangers of recency bias in investing.

Key Takeaways:

• Challenge Assumptions: Always question the underlying assumptions of an investment. Is the company's business model truly immune to external factors like regulatory changes or technological disruption?

• Stay Vigilant: Markets are not "set it and forget it." You must always be on your toes, staying informed about legal, political, and competitive changes that could impact your investments.

• Diversify: A significant allocation to a single stock, even one that seems safe, exposes you to immense risk if that company's fortunes change. Diversification is your best defense against such events.

Remember, a "no-brainer" investment today could be a cautionary tale tomorrow. Always maintain a healthy skepticism and a long-term perspective.