South Korea’s benchmark index Kospi’s sharp fall on Friday triggered a 20-minute trading halt — the second such instance during the week. However, market experts do not expect any significant spillover impact on Indian markets.
“Indian markets are most likely to remain rangebound. The Nifty is likely to move between 23,800 and 24,600,” said Arun Kejriwal, founder of Kejriwal Research. On IT stocks, he said the sector has already witnessed a significant correction. While there could be some further downside, the fall is likely to remain limited.
Structural Resilience
Pankaj Pandey, head of research at ICICI Securities, said the broader market may not be impacted significantly as the IT sector accounts for only around 8% of the index, unlike the Kospi, which is heavily influenced by two major stocks — Samsung Electronics and SK Hynix. These stocks fell 6.12% and 8.40%, respectively, on Friday.
Pandey added that any pressure on Indian IT stocks due to the Korean sell-off could be offset by strength in sectors such as banking, financial services and insurance (BFSI), preventing a major decline in the indices. He also believes that part of the correction could be due to global investors seeking to diversify their portfolios.
Vinit Bolinjkar, head of equity research at Ventura Securities, termed the volatility a market-specific event for South Korea, saying the recent rally had pushed valuations to elevated levels, leading to the correction. He believes that the early stage of AI infrastructure development among Indian IT companies means any further fall in Kospi-linked stocks could be short-lived, with IT stocks likely to recover quickly.
Expert also beleive that the sharp fall comes on the back on very big rally for Kospi while Indian markets have been depressed. To put things in perspective, South Korea and Taiwan’s markets have gained 99.6% and 53%, respectively, while the Nifty has declined 7.9% since the begining of the calendar year. On Friday, when Indian markets remained closed, the GIFT Nifty fell 28 points.
AI Overheating Fears
The sharp rally in AI-related stocks has also raised concerns over the sustainability of the theme. Recent price increases by companies such as Apple have raised questions over whether higher pricing power could come at the cost of future demand, prompting a broader reassessment of AI-linked semiconductor stocks. There are also concerns about delay in OpenAI initial public offering.
“The memory trade still has legs, but the tailwind is selective while the headwind is much broader,” Charu Chanana, chief investment strategist at Saxo Markets, told Bloomberg.
Reports that Samsung and SK Hynix are preparing to announce hundreds of billions of dollars in fresh investments next week have also added to concerns over future cash flows. Samsung Group is reportedly set to unveil a 1,000 trillion won spending package over the next decade, which would be among the largest investment plans in South Korea’s history.
