Is the Market Meltdown Just the Beginning?

Market Update - Friday, 24 Apr

IT stocks are currently cause for concern as a meltdown is unfolding, led by major players like Infosys and TCS. More than 1 lakh crore of market cap was wiped out across these stocks combined. The long-term chart of the IT sector is not looking very encouraging.

Market charts, which looked very nice until three days back, have now turned down. A gap created previously was filled today. It was not a complete washout day, but there were significant losses of 1.14%.

• Nifty Junior is down 0.75%, showing a good recovery from its daily bottom, but the short-term trend has gone negative.

• Mid-caps are losing 1%, small caps are down 1.07%, and Nifty Bank is down 0.38%, which is not so bad.

• Gold is absolutely flat, not reacting at all at minus 0.05%.

• Crude oil is also down today, by 4.77%, after yesterday's flurry, but the market is not interested in the crude oil fall right now; it wants more concrete evidence that something good is happening.

Other Market Triggers

• Nifty Next 50 saw some green in Adani and Adani Ensol, but there were significant losses in capital goods that were running so far, as ABB, CG Power, and Solar Industries all lost ground.

• LTIM was down 5.5%, GodrejCP was down 4.6%, Hyundai was down 3.2%, and Vedanta, which is going into a demerger, was not able to hold, ending at minus 2%.

• In the Movers of the Day segment, UTI AMC was down 10.6% as profits plunged 73%, leading to the stock being smashed down.

• Infosys is the leader of the weak stocks today, dropping sharply after giving guidance for next year of only 2% to 3%. The question arises of who is going to pay this kind of multiple on the stock. Liquidity has been getting out of IT stocks for a long time; if investors were following liquidity, they would not have needed to worry about earnings or guidance, as just following liquidity would have kept them away from IT stocks.

• None of the company strategies have had any IT stocks for a long period, which is reasonable as per the momentum strategy, which dictates that if there is no strength, there is no chance of that stock being in the portfolio.

U.S. Market Updates

• The previous session on the US markets was very dramatic as well. ServiceNow lost 18%, Thermo Fisher 9%, Salesforce 8.69%, IBM 8%, and Palantir 7%.

• The US market is starting to look a bit shaky after making new highs, with a 0.4% cut on the indices and 0.6% on the Nasdaq, but some stocks are falling like nine pins. Some of these stocks could have been part of the weekend investing US stock strategy.

• The Nasdaq 100 heat map is pretty red. Microsoft is cutting some 9,000 jobs, having sent a mail during the lunch hour to employees saying that from tomorrow they need not come.

• Palantir is down 7% and Tesla is down 3.5%. It is a brutal world out there, and those with a secure job are very lucky.

What to watch next ?

• The best hope is that the market does not break into this gap; otherwise, it will head below 23,000.

• Hopefully, some turn will be seen here. The war in the Middle East does not seem to be ending, with new attacks on Lebanon.

• There is no breakthrough right now, though whenever it happens, it will occur in a moment.

• While the market is trying to discount some thawing of that situation, today, the market’s back was broken, and a very short-term downtrend has started, aided by the IT meltdown.

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What To Read This Week ?

Market Timing vs. Staying Invested: Insights from Ben Carlson’s S&P 500 Data

Market volatility often triggers the urge to time the market—to sell at the peak and buy at the bottom. However, recent data shared by Ben Carlson regarding S&P 500 returns provides a fascinating perspective on what truly drives long-term wealth.

Whether you are a disciplined "buy-and-hold" investor or someone who actively seeks out entry points during market corrections, the numbers tell a compelling story.

The Power of Buying the Dip

The data highlights that while market crashes are unsettling, they are arguably the most lucrative times to be invested. When you look at the returns generated from the absolute "bottoms" of various bear markets over the last 20 years, the growth is nothing short of spectacular:

• 2008 Financial Crisis: Returns from the bottom sit at a staggering 1,292%.

• 2011 European Debt Crisis: Markets surged 700% from the low point.

• 2020 COVID-19 Crash: Investors saw a 238% gain from the bottom.

• 2022 Inflationary Bear Market: Markets are up 104% from those lows.

• 2025 Correction: Even the recent dip has yielded a 41% gain.

Top vs. Bottom: Does Entry Point Really Matter?

It is natural to worry about buying at the "top." However, the data reveals that even those who entered at the peak before major crises have seen significant long-term growth. Comparing the pre-crisis highs to current levels:

• From 2008 Highs: Markets are still up 524%.

• From 2011 Highs: Up 564%.

• From Pre-COVID Highs: Up 124%.

• From 2022 Highs: Up 54%.

While the gap between entering at a "top" versus a "bottom" is substantial, the takeaway is clear: Time in the market beats timing the market. Even those who didn't time the bottom perfectly have realized life-changing returns over the last two decades.

Actionable Strategies: Finding Your Edge

While simply staying invested is a winning strategy, those with the ability to time their entries can achieve "superior" returns. If you are an active investor looking to capture those massive "bottom-fishing" gains, consider the following technical approaches:

1. Trend Following: Utilize moving averages (such as the 200-day DMA) to identify shifts in market sentiment.

2. Volatility Indicators: Employ ATR (Average True Range) based systems to set stop-losses or entry points.

3. Systematic Exit/Entry: Define a clear rule—like exiting when a stock falls below its 200-DMA—to protect capital, and re-entering only when a definitive trend reversal is confirmed at the bottom.

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