Moneycontrol Pro Panorama | Nasdaq rout, a wake-up call?

To be sure, it’s a wake-up call for investors who are realising that the payoffs for billions of dollars invested could take longer than envisaged. The big question: Is the AI frenzy cooling off?

The Magnificent Seven had hogged the limelight with a large part of the market remaining unloved in the past few quarters. In fact, some analysts had expected a rotation in funds from the tech segment to mid and smaller cap stocks which displayed stability in earnings trajectory and traded at reasonable valuations.

Also, softer-than-expected inflation data in the US has ignited hopes of an impending rate cut by the Federal Reserve in September. Some observers point out that the US yield curve is turning steeper, implying possibilities of a near-term rate cut. In this context, a recently published FT article (carried last week in MCPro) highlighting violent rotation said smaller companies tend to benefit more during rate cuts as some of them could have bigger debt burdens than large-cap ones. This perhaps exacerbated the fall in overheated tech stocks as investors took cognisance of a larger menu they could choose from.

Investors in Indian equities saw the reverse trend in the past two years, when small-and-mid-cap stocks steadily outperformed the large-caps till recently.

A reality check on the basis of fundamental earnings growth, more often than not, has punctured bubbles in equity markets. But the jury on the impact of AI is still out. It remains to be seen whether the profit booking in tech stocks is just a bout of nervousness or a warning of dangerously stretched valuations.

Investing insights from our research team

Axis Bank Q1 FY25 – slower earnings trajectory ahead, warrants caution

Federal Bank Q1 FY25 – change of guard amid all-round strength

Larsen and Toubro: Expect better recovery, aided by higher execution, order inflows

KPIT: Strong quarterly show, but is valuation playing ball?

Jindal Steel and Power Q1: Resilient show in a tough market environment

Sona BLW Q1 FY25: Robust numbers, focused investment in EVs

SRF: Banking on the ramp-up of recently commissioned assets

Mahindra Finance: Profit jumps sharply amid unique challenges

What else are we reading?

Mild overweight on equities; bullish on Indian government bonds: the post-Budget view

India Inc’s effective tax rate rises on the back of large companies, services sector

SEBI's intraday trading report exposes market disparities

Chart of the Day: FDI equity inflows to infrastructure step up

India’s SMEs need a comprehensive policy beyond budgetary finance to go global

How large IT companies stack up on growth rates after June quarter

Inflation, stock prices, and french fries (republished from the FT) Funding surge for blank cheque companies points to Spac bounceback (republished from the FT)

Congress has been systematically targeting RSS with bans, a brief look at history

All stakeholders not satisfied, but Budget has something for everyone

Finally, getting down to the brass tacks in a budget

Should the Budget have set a higher capex target?

Budget nudges growth in the immediate term, opens pathways for new reforms

For key infrastructure sectors, the Union Budget 2024 is par for the course

Tech and Startups

WazirX’s $230-mn hack will stall the crypto industry’s progress with regulators

Technical Picks: NTPC, Ashok Leyland, HBL Power, and Indiamart Intermesh (These are published every trading day before markets open and can be read on the app).

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Vatsala Kamat
Moneycontrol Pro