IT CRASH : 99% Bought at the Wrong Time !!

Market Update - Friday, 19 June

The IT sector faced a significant sell-off in the stock market, triggered by poor future guidance from Cognizant, one of the largest IT services companies globally. This negative outlook caused major Indian companies like TCS and Infosys to follow suit. Big IT stocks dropped between 4% and 7% in a single day, leaving them down by 40% to 50% from their recent peak levels.

The Nifty index closed down by 0.64%, recovering from an earlier drop of more than 1% during the day. Even with the heavy overhang of tumbling IT stocks, the rest of the market held up reasonably well.

• gold prices slid by 1.12%, bringing the rate to 14,515 per gram. The hawkish stance maintained at the recent Federal Reserve meeting has rattled the short-term gold market, meaning the precious metal will need to find a new base before it can build back upward momentum.

• Meanwhile, crude oil prices stabilized around 79 dollars per barrel, after previously dipping as low as 76 dollars.

Other Market Triggers

• The Nifty heat map showed sharp losses for major heavyweights, as Infosys, TCS, HCL Tech, Wipro, and even Reliance and HDFC Bank were not spared.

• Reliance declined despite announcing an upcoming initial public offering for its Jio platform and filing the draft red herring prospectus.

• Mahindra and Mahindra, Maruti, and State Bank of India also ended the day lower.

• Conversely, Bharti Airtel perked up on the back of this news.

• The Nifty Next heat map was predominantly red as well.

• Oil marketing companies, LTIMindtree, United Spirits, and DLF all gave up the ground they had gained over the previous couple of days.

• Meanwhile, Muthoot Finance, Canara Bank, Bank of Baroda, and IndusInd Bank remained reasonably flat.

• Among the top movers of the day was NIACL, the New India Assurance Company Limited.

• The company, alongside LIC and IFCI, saw its stock rise because it holds shares in the National Stock Exchange, which has just filed its initial public offering draft red herring prospectus.

U.S. Market Updates

Shifting focus to the international markets, the previous session in the United States saw strong gains for the NASDAQ, which jumped 2.48% in a single day.

Have questions about our U.S. Strategy? Email us at [email protected]

What to watch next ?

• The day also brought a critical lesson regarding high-net-worth investors and market literacy. A prominent investor shared that he had purchased 10 lakh shares of Jaiprakash Associates at around 10 rupees per share.

• Now, through the ongoing corporate insolvency restructuring process, the equity value of Jaiprakash Associates is being marked down to zero.

• This points to a very common theme where even substantial investors do not fully understand National Company Law Tribunal and bankruptcy proceedings.

• In these situations, equity holders have the absolute last charge on the remaining corporate assets.

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Strategy Of The Day

What To Read This Week ?

The Shift in Foreign Inflows and India’s New Financial Resilience

Today’s data is incredibly vital for understanding the underlying mechanics of our stock market. Domestic brokerage powerhouse Edelweiss recently concluded an extensive 18-year study tracking the behavior and flows of Foreign Portfolio Investors (FPIs/FIIs) in India.

The study reveals a fascinating shift: the absolute power foreign investors once held over Indian equities is fundamentally changing. Let’s break down what the numbers actually mean for your portfolio.

📊 The History of FPI Selling Cycles

If we look back over the last two decades, foreign investors have historically moved in distinct cycles. The study highlights specific years where FPIs net-sold Indian equities:

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• Major Selling Years: 2008, 2011, 2018, 2022, and a continuous selling streak over the last three years.

• The 2024 Nuance: While 2024 was virtually flat (near-zero net flow), the overall pressure from foreign exits has lingered for three consecutive years.

📉 The Illusion of Absolute Numbers: ₹52,000 Cr vs. ₹2,24,000 Cr

On paper, the recent selling figures look terrifying. However, looking at absolute numbers without context gives a completely warped view of reality:

• FPI Selling in 2008: ₹52,000 Crores

• FPI Selling in the Recent Cycle: ₹2,24,000 Crores

The Market Cap Factor: While a ₹2.24 lakh crore exit sounds massive compared to ₹52,000 crores, the Indian stock market's overall Market Capitalization has grown more than 10 times over the last 20 years. Proportionally, ₹52,000 crores back then carried the weight of what ₹20,000 to ₹25,000 crores would mean today.

Visualizing the Impact (% of Total Market Cap):

Even by dumping ₹2.24 lakh crores into the market today, foreign investors haven't even cleared half a percent of the total market cap.

🛡️ The New Counter-Balance: Why Markets Aren't Crashing Anymore

There was a time when a mass exodus of foreign funds meant an immediate bloodbath for Indian retail investors. But look at how the market’s reaction to FPI selling has evolved over time:

• The 2008 & 2011 Crashing Eras: FPI exits triggered massive market corrections of -56% and -26% respectively.

• The Modern Resilience Era: In subsequent FPI selling years, the market’s annual returns stood at -2%, +4%, +16%, +7%, and most recently, a minor dip of just -5%.

The Takeaway: The market is no longer hostage to foreign capital. A massive structural counter-balance has emerged in the form of Domestic Institutional Investors (DIIs), robust Mutual Fund SIP inflows, and an empowered domestic retail investor base that aggressively absorbs foreign selling.

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Meme Of The Day