More Stories

Informist, Thursday, Jul 25, 2024

By Anshul Choudhary

MUMBAI – The benchmark indices had another volatile session today as investors continued to take out profits after the Budget for 2024-25 (Apr-Mar) was presented Tuesday, but strong inflows helped them cover most of the fall. The Nifty 50 ended lower for the fifth straight session with earnings of some major companies and the monthly expiry of derivatives leading to volatility.

Several analysts pointed towards uncertainty within the market as the mega event of the Budget is behind us. India VIX, the market's volatility indicator, rose over 7% to 12.62 today. The Nifty 50 closed marginally lower at 24406.10 points, and the BSE Sensex closed 0.1% lower at 80039.80 points.

Disappointing earnings of Axis Bank led to an initial sell-off in large private banks, pulling the Nifty 50 down. Profit-taking in information technology stocks deepened the fall. At one point, the Nifty 50 was down 0.8%. Weak global cues also pushed investors to sell initially as major US markets closed lower on Wednesday, and indices in Asia and Europe were down.

Later, buying in index heavyweights such as Larsen & Toubro and HDFC Bank helped the indices come off the day's lows. Market participants pointed out that mutual funds are sitting on a lot of cash and buying from them is helping the market limit losses.

Sharp gains in anticipation of the Budget earlier this week are now pushing people to take out their profits as the major event is behind us, analysts said. However, they remain positive on equities as the government has not tweaked its capital expenditure plans and has even announced welfare schemes that may support consumption.

Moreover, the higher capital gains tax is unlikely to deter people from investing in the stock market, analysts said. The capital gains tax hike is insignificant, and the focus for investors will remain on macroeconomic indicators and earnings growth, said an equity strategist with a domestic brokerage.

With the earnings season in full swing, there were several stock-specific reactions. Shares of Axis Bank fell sharply after its net profit came in lower than expectations and asset quality deteriorated quarter-on-quarter. The bank's net profit was below analysts' estimates on account of higher-than-expected credit costs, said Macquarie, according to a report by ETNow.

The weak performance pushed some brokerages to cut their target prices for Axis Bank. Nuvama Institutional Equities cut its target price to 1,430 rupees from 1,500 rupees, while Prabhudas Lilladher cut its target price to 1,425 rupees from 1,450 rupees.

Axis Bank's net profit for the reporting quarter fell over 15% sequentially to 60.35 bln rupees due to a rise in provisions and decline in asset quality. The bank's asset quality deteriorated as gross non-performing assets rose 11 basis points on quarter, but the management said these are not sustainable trends and are likely to be reversed in the quarters to follow. Apart from Axis Bank, shares of ICICI Bank fell over 2%, those of IndusInd Bank fell 1.3%, while those of HDFC Bank gained 0.8%.

Shares of Nestle India extended their intraday fall after the company's net profit and revenue missed analysts' estimates. Nestle India reported its earnings during market hours. It posted a net profit of 7.47 bln rupees for Apr-Jun, up nearly 7% on year, driven by domestic sales. This was lower than the Street's expectation of 8.02 bln rupees.

Further, Nestle India's domestic volumes grew 1% on year in Apr-Jun, lower than the expectation of 4-6% growth, CNBC-TV18 reported, citing sources. The company said it faced challenges due to lower consumption growth, extreme weather conditions, and volatile commodity prices. 

Shares of steel companies continued to fall on concerns around dumping from China, hurting the growth of Indian companies. Shares of Tata Steel fell nearly 2%, and those of JSW Steel fell 0.8%. Among other large-cap stocks, shares of Titan Co fell amid concerns over inventory loss that is seen rising after the cut in customs duty on gold in the Budget. The gold jewellery industry is staring at a loss of 180 bln rupees due to the reduction in basic customs duty on the precious metal in the Budget, according to Surendra Mehta, national secretary of the India Bullion and Jewellers Association.

Shares of IT companies were mixed amid selling for profit in some counters. Shares of LTIMindtree fell 1%, those of Infosys fell 0.5%, while those of Tata Consultancy Services rose 0.4%. Shares of IT companies have risen recently on expectations of better earnings ahead, but investors have taken out profits in the past few sessions.

On the upside, shares of Tata Motors rose over 6% after Nomura Global Markets Research upgraded the stock to 'buy' from 'neutral' and raised the target price to 1,294 rupees from 1,141 rupees. "We believe the transition from premium to luxury will help JLR (Jaguar Land Rover) stay one level above the high competition segments. The strategy is working well, in our view, as incentives for Land Rover have been well under control despite an increasing trend across the rest of the OEMs (original equipment manufacturers)," Nomura said. Earnings growth can be stronger due to a rise in average selling prices and margins, though volume growth may be low, it said.

Among others, shares of SBI Life insurance rose 3% after the company's net profit for Apr-Jun grew 36% on year to 5.2 bln rupees. Nirmal Bang Institutional Equities is confident about the company's prospects because of its strong delivery on growth of annualised premium equivalent, an established network of bancassurance and agency channels, and a favourable cost profile.

The broader market indices underperformed the benchmark indices. The Nifty Midcap 150 and Nifty Smallcap 250 closed 0.3% lower each. KPIT Technologies and AU Small Finance Bank were some of the worst-hit mid-caps, while Hindustan Petroleum Corp and Syngene International were the top gainers in the pack. Hindustan Petroleum Corp is set to release its quarterly earnings next week.

Among others, shares of liquor companies rose after Informist reported, quoting a source, that the government of Andhra Pradesh is mulling buying liquor from these companies. The state plans to resume procuring liquor from reputed brands, replacing the current local brands, a government source told Informist. Shares of United Spirits, Radico Khaitan, United Breweries, and Tilaknagar Industries rose.

Shares of Tilaknagar Industries witnessed the sharpest reaction, rising nearly 9% to a month's high of 262 rupees. The stock was up 2% before the news came in. It eventually closed 6.7% higher at 257.35 rupees.

* Of the Nifty 50 stocks, 25 rose and 25 fell

* Of the Sensex stocks, 12 rose and 18 fell

* On the NSE, 1,369 stocks rose, 1,318 fell, and 78 were unchanged

* On the BSE, 2,097 stocks rose, 1,812 fell, and 114 were unchanged

* Nifty Metal: down 1.3%; Nifty Private Bank: down 0.9%; Nifty Oil & Gas: up 2.2%

BSE                                               NSE
Sensex: 80039.80, down 109.08 pts or 0.1%         Nifty 50: 24406.10, down 7.40 pts

End

Edited by Tanima Banerjee and Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.