Can It Be Another Bloody Monday ?

Market Update - Friday, 10 Apr

It has been a good week after many weeks of waiting. As mentioned at the beginning of the month, there was a high probability that April would be a green month. After four consecutive down months, the market was due for a bounce, and it is a notable coincidence that ceasefire negotiation attempts in the ongoing war have aligned with this timing.

The Nifty closed up 1.16%, indicating that the previous day's loss was merely a profit-booking event. Stocks looked reasonably strong, and the index has now closed above 24,000 for the first time in over a month, wiping out the losses of the previous several weeks.

• Nifty Junior is performing exceptionally well, rising 2% today and marking six days of continuous gains.

• This represents a fast comeback for Nifty Junior, where both the short and mid-term trends have turned positive.

• Mid-caps and small-caps also saw gains today, rising 1.6% and 1.61% respectively. Both indices have enjoyed six days of continuous gains, and while a V-shaped recovery may not continue without some consolidation or profit-taking, the move from near 14,000 to 15,753 is a significant relief.

• Nifty Bank also looked strong with a 1.99% gain. This recovery highlights the risk of getting out of the market due to fear; those who exited at the end of March missed this entire rally, including a significant gap up.

• Once investors give up their positions, they often find it very difficult to buy back in at higher prices.

• In other asset classes, gold remained flat at 0.09%, while crude oil is holding at a middle ground of 96 dollars after a volatile journey from 70 dollars to 120 dollars.

• The long and mid-term positive trends for crude remain intact.

Other Market Triggers

• While the heat map showed some losses in IT, pharma, and energy stocks, these were offset by gains in banking, autos, and infrastructure.

• Nifty Next 50 also saw a nice green cover across the board. In the mover of the day segment, Cohance rose 20% after a significant drop over the past few months.

• Many IT stocks seem to be finding a bottom and looking for a new leg up, and Cohance appears to be among them.

• Conversely, Coal India dropped 4.4% following a cut in e-auction prices intended to help firms absorb cost surges. Lowering the price of a final product typically harms stock prices, which impacted Coal India despite its strong performance a few weeks ago.

U.S. Market Updates

• In the previous U.S. session, markets were led by gains in Amazon, Intel, Texas Instruments, Netflix, and Meta, with most indices gaining 0.6% or more.

• While the heat map was mostly red, Palantir has been dropping significantly, losing 7% after peaking between November and January.

• Meanwhile, Amazon is gaining ground after a quiet period, and Intel has been performing well. These observations are part of the U.S. weekend investing strategy and are not recommendations.

What to watch next ?

• Regarding the rumors about the Iranian delegation not reaching Islamabad, it is difficult to verify their accuracy, but the market notably did not pay heed to them, which is a positive sign.

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What To Read This Week ?

The 4% Rule: Who Actually Creates Wealth in the Stock Market?

Financial analyst Ben Carlson recently shared a staggering data point regarding the U.S. stock market that flips the "buy and hold anything" strategy on its head. Over the long term, the U.S. markets have generated a massive $91 trillion in wealth. However, when you peel back the layers to see which companies actually built that mountain of gold, the results are humbling.

The Great Wealth Mirage

While $91 trillion sounds like a rising tide that lifted all boats, the reality is much harsher. It turns out that 60% of all stocks were actually wealth destroyers. They lost money or failed to provide any meaningful return. Another 37% of stocks did just enough to offset the losses created by that bottom 60%.

When you do the math, 96% of firms effectively delivered a net zero outcome. The entire $91 trillion in wealth was generated by a tiny elite: just 3.7% of companies.

The Death of Passive Luck

In the mid-20th century (the 1930s through the 1950s), picking stocks was arguably "easier." During that era, 70% to 80% of stocks consistently beat the risk-free interest rate (T-Bills). If you threw a dart at a board, you had a massive chance of winning.

Fast forward to today, and that figure has stabilized at around 50%. Only half of the stocks in the market can even manage to outperform a basic bank return or government bond. This means simply "sitting on a stock" no longer guarantees you a better return than a savings account.

Survival of the Winners

The analogy holds true across almost every global market: a few "Super-Winners" carry the entire team. This "Power Law" means that the strength of the market is concentrated in a handful of high-performers.

If your portfolio doesn't include these survivor firms, you are likely underperforming the benchmark, regardless of how long you hold.

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