AI, Policy Shocks Drive Market Rotation

Indian equities fell for a sixth straight session, with the Nifty closing at 24,654 (down 0.95%) and the Sensex at 80,426 (down 0.90%), as steep losses in pharma and IT followed a reported 100% tariff on branded drugs and a sharp H‑1B fee hike. Corporate headlines included an Income Tax survey at Raymond and a U.S. probe of Waaree, while microcaps Bharat Gears and RACL Gear saw sharp rallies. In the U.S., The Trade Desk and Super Micro were the S&P 500’s worst August performers after weak guidance, a CFO departure at TTD, and margin deterioration at SMCI. Analysts and StockStory flagged legacy service names such as IBM and Barrett Business Services to avoid for stagnant sales and weakening returns, while highlighting winners with durable advantages—Broadcom, Lam Research, Netflix and W.W. Grainger. They cautioned investors to be skeptical of bullish price targets and wary of speculative small‑cap names like Freshpet, PlayStudios and Dine Brands due to thin margins or weak cash generation. Overall, policy shocks, earnings guidance and structural tech/AI shifts are driving a rotation toward semiconductors and high‑margin tech/AI plays and creating acute risks across certain services, retail and smaller stocks, so investors should prioritize durable competitive advantages over short‑term momentum.