Are Tech Giants Losing Their Grip?

Market Update - Tuesday, 6 Jan

Global markets have been ticking along quite well despite the ongoing geopolitical situation between the United States and Venezuela. Even the Venezuelan markets have shown surprising resilience, which is a topic explored further toward the end of this update.

While there has been much to celebrate regarding the all-time high marks reached by the Nifty and Sensex, the positive start to the New Year is accompanied by strong headwinds that are creating impediments for the Indian markets.

The United States has issued fresh warnings to India regarding higher tariffs. A clear message has been sent that India should curb its purchase of Russian oil. These trade negotiations have been ongoing for several months, particularly after the US doubled import tariffs on Indian goods to 50%.

There were strong expectations that a conclusion to these negotiations would positively impact the markets and cause them to tick upward in 2026, but those prospects currently appear quite bleak.

The major news today is that Reliance Industries shares sank about 4.47%, marking the worst single-day fall since June 2024. To look at this chronologically, a Bloomberg report on January 2, 2026, claimed that three vessels carrying Russian crude were heading to the Jamnagar refinery. On January 5, the stock opened well and saw a high in the first 15 minutes, but this was followed by heavy selling.

• The Nifty closed down 0.27% today. Despite this slight fall, the positive momentum appears intact, with the current movement looking like profit booking ahead of the earnings season.

• In contrast, the Nifty Junior index recorded a 0.27% uptick, reaching a level of 70602 and showing positive momentum across short, medium, and long-term parameters.

• The Nifty Mid Cap Index lost 0.2%, while the Small Cap Index fell 0.3%, coming down to test its 50-day moving average.

• The Bank Nifty was a positive mover, rising 0.12%.

• Gold remained flat with a minor 0.03% dip after a strong rally, while Silver continued its performance with a 1.2% uptick following yesterday’s 4.5% surge.

Other Market Triggers

• The market heat map was heavily impacted by Reliance and HDFC Bank, which fell 1.5%.

• However, the tech sector saw an uptick, with TCS up 1.23%, HCL Tech up 0.54%, and Wipro up 0.87%.

• Zomato fell 0.98%, and ITC continued to decline by 2.07%.

• Trent served as a notable case study today, dropping 8.6% after sequential revenue growth stayed flat.

• Trent has been bleeding in 2025 and is currently at a 55% drawdown.

US Market Updates

• US markets have performed well over the last day, with small caps up 1.58%, the Nasdaq up 0.7%, and the S&P 500 up 0.64%.

• Leading stocks included Emerson Electric, Chevron, Citigroup, Goldman Sachs, and Palantir.

• The Nasdaq presented a mixed bag with Amazon and Tesla doing well while others fluctuated.

What to watch next ?

• It is now evident that the US can use the tariff card at any point, and it will be interesting to see how India responds to this threat and how the markets subsequently react to that response.

• Only time will provide those answers, though there is hope for a positive turn in the future.

• Due to this prevailing uncertainty, the India Volatility Index (VIX) has risen 10% across the last couple of sessions.

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📈 The Great Rotation: Are Tech Giants Losing Their Grip?

The 30-Year Pendulum: Tech vs. Defensives

Data recently highlighted from The Kobeissi Letter presents a compelling 30-year chart (1995–2025) tracking the movement of Global Defensive Stocks—think FMCG, Consumer Staples, Healthcare, and Utilities—against the total Global Market Cap.

Historically, these defensive sectors maintain a steady "weight" in the global market, usually hovering between 20% and 30%. However, when Tech stocks go into a "super-nova" phase, the relative market cap of defensive stocks doesn't just dip—it crashes.

History Rhymes: The 2000 Dot-Com Echo

We are seeing a pattern that looks eerily similar to the year 2000. During the Dot-com boom, Tech dominance pushed defensive sectors to record lows in terms of global market share. Once the Tech frenzy cooled, money flowed back into "boring" but stable businesses, and defensive stocks normalized.

Current Market Snapshot:

• Tech Dominance: Has reached extreme levels recently.

• Defensive Crash: The percentage of Global Market Cap held by defensive sectors has plummeted to levels seen decades ago.

• The Rebound: We are just now seeing the first signs of a "tick up"—defensives are starting to recover from their floor.

What This Means for India: A Shift in Focus

If the US and global markets follow this path of "mean reversion," the ripple effects in India could be significant. For the past few years, high-beta sectors and IT have led the charge, while others lagged.

We might see a shift where capital moves away from high-valuation Tech/IT and into the "laggards" that are now showing value:

• FMCG & Staples: Regaining pricing power and interest.

• PSU Banking: Catching up after a long period of consolidation.

• Pharma: Moving from a defensive play to a growth recovery play.

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