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Informist, Friday, Aug 2, 2024

By Noel John

MUMBAI – Renewed fears of a possible recession in the US weighed on Indian equity indices, similar to its global peers, and ended the session sharply lower today. Both the Nifty 50 and Sensex ended the week in the red, snapping a five-day weekly winning streak. Today's fall comes a day after the market recorded its fresh lifetime high in the previous session.

On Thursday, the US markets were sharply down due to a sell-off triggered by data which indicated a weakening job market and lacklustre manufacturing activity in the country. Equity indices in Asia and Europe followed suit and were also sharply down today. Japan's benchmark Nikkei 225 saw its steepest percentage-point drop since March 2020. A stronger yen and signs of a weakening US economy dragged chip-related and financial stocks lower, The Wall Street Journal reported. 

The rise in the number of new applications for unemployment claims in the US hinted at a weakening job market, which also raised concerns among investors that the Federal Reserve may be too late to start trimming interest rates. Further, US manufacturing activity fell to an eight-month low in July, which also likely added fuel to the worry that the country may fall into a recession. 

Today, the Nifty 50 ended 1.2% lower at 24717.70 points and the Sensex ended 1.1% lower at 80981.95 points. The fear gauge, India VIX, rose sharply and ended 10.8% higher at 14.32 today, indicating investors' nervousness amid global uncertainties. The 50-stock index is now expected to find support at 24450 points, while the psychological level of 25000 points has again become the immediate resistance for the index, as per analysts. 

The focus of domestic investors will remain on Apr-Jun earnings going forward, Ajit Mishra, senior vice president of technical research at Religare Broking said. 

Shares of automobile companies were among the major laggards in today's session as they extended losses owing to the negative sentiments in the overall market and mixed July sales data. "July data shows signs of weakness for commercial vehicles and potential risks for passenger vehicles. But two-wheeler growth remains healthy and tractors have shown some early promise of revival," Nomura said in a research report today. 

Eicher Motors, Maruti Suzuki India, and Tata Motors were the worst performers in the Nifty 50 today and closed over 4% lower each. Eicher Motors, the maker of Royal Enfield motorcycles, reported an 8% on-year decline in two-wheeler despatches for July, the company reported late Thursday. 

Maruti Suzuki extended losses after its total production declined 0.5% in July as its output across segments, except for utility vehicles and vans, dropped. The company's total sales in July also fell 3.6% on year, on account of a drop in sales of passenger cars and utility vehicles in India. 

Further, shares of metals and information technology companies were among the other major laggards today, extending losses from the previous session. Metal companies had gained on Thursday after a brief rebound from their short-term support levels.

Bucking the trend, shares of select banking and financial companies were in the green throughout the day. Index heavyweights HDFC Bank, Kotak Mahindra Bank, and Shriram Finance were among the few Nifty 50 constituents which closed higher. "It's pure sentimental on charts for HDFC Bank and Kotak Mahindra Bank ... as for Shriram Finance, the results were good and management guidance were also encouraging," Shreyansh V. Shah, research analyst at StoxBox, said. 

Shares of pharmaceuticals and healthcare companies were also among the gainers today owing to their defensive nature. Divi's Laboratories, Dr Reddy's Laboratories, and Sun Pharmaceutical Industries were the major gainers in the Nifty 50 index today. Owing to this, the Nifty Pharma and Nifty Healthcare were the only two sectoral indices which ended in green. Both the indices have hit their record highs today. 

The broader market indices, which hit a record high on Thursday barring the Nifty Smallcap 100, saw further selling today. According to analysts, the weakness may continue for a couple more sessions owing to expensive valuations in this space. Investors, especially retail players, are not concerned about these short-term corrections in broader markets since their portfolios have already made good returns from them, Vinit Bolinjkar, head of research at Ventura Securities, said. 

On the stocks front, shares of Cummins India closed 8% lower, becoming the worst performer in the Nifty 200 after weak commentary from its parent company, Cummins Inc, in the US. Cummins, during its post-earnings conference call, said that its India operations revenue has seen a 10% on-year decline in the June quarter, as per various media reports. The Street was expecting a growth of 12% in its India revenue in Apr-Jun.

Zomato's shares rose over 19% and hit an all-time high of 278.70 rupees today after reporting robust major earnings growth for the June quarter. Following the strong earnings, multiple brokerages raised the target price of the stock. The company's consolidated net profit for the June quarter rose manifold to 2.53 bln rupees from just 20 mln rupees a year ago. This was supported by a healthy gross order value and margin expansion across all its four businesses – food delivery, quick commerce, going-out, and Hyperpure.   

Shares of Info Egde (India), which holds a 13.53% stake in Zomato, also saw some buying and ended 4.6% higher following the surge in the food delivery company's stock. The company will report its June quarter earnings on Aug 9. 

* Of the Nifty 50 stocks, 9 rose and 41 fell

* Of the Sensex stocks, 5 rose and 25 fell

* On the NSE, 1,059 stocks rose, 1,630 fell, and 82 were unchanged

* On the BSE, 1,705 stocks rose, 2,212 fell, and 116 were unchanged

* Nifty Realty: down 3.5%; Nifty Auto: down 2.9%; Nifty Pharma: up 0.5%

BSE                                              NSE
Sensex: 80981.95, down 885.60 pts or 1.1%          Nifty 50: 24717.70, down 293.20 pts or 1.2%

End

Edited by Tanima Banerjee

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