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Informist, Friday, Sep 6, 2024

By Noel John

MUMBAI – The fall in index heavyweight stocks, coupled with weak cues from global markets, dragged the Nifty 50 lower, extending losses for the third straight session. Losses in the shares of State Bank of India, ICICI Bank, and Reliance Industries primarily dragged the 50-stock index lower. 

The Nifty 50 and the Sensex ended 1.2% lower each at 24852.15 points and 81183.93 points, respectively. The 50-stock index today witnessed a breakdown from the support level at 24950 points and is expected to fall further to 24500–24450 points in the short term, Vipin Kumar, senior technical and derivatives analyst at Globe Capital Market, said.  

The index will likely correct by at least 500 points in the coming week owing to expensive valuations, Vinit Bolinjkar, head of research at Ventura Securities, said. The fall in benchmark indices will be led by banking stocks, which are already facing a lot of heat owing to sectoral headwinds such as slower deposit growth and net interest margin compression, among others, Bolinjkar added. 

The broader market indices also fell sharply today in tandem with the overall domestic market. All Nifty Smallcap indices shed gains after they hit their all-time highs in early trade. The profit booking seen in the broader markets was due to concerns regarding expensive valuations, a need to generate liquidity from the secondary market to finance a record number of initial public offerings lined up this month, and also due to the concerns regarding issues faced by the banking sector, Chokkalingam G, founder of Equinomics Research, said. 

Banking stocks were among the major laggards today, with State Bank of India, ICICI Bank, Axis Bank, and HDFC Bank being the worst performing constituents of the Nifty 50. "Slowdown in credit growth, competition to grow deposit books faster and hence, rise in cost of deposits, the need for reducing credit-deposit ratio, need to make provisions for expected credit loss are all impacting the banking stocks today," Chokkalingam said.

SBI was the worst performer in the Nifty 50 index after brokerage firm Goldman Sachs turned bearish on the stock. The stock ended 4.4% lower at 782.50 rupees on the National Stock Exchange. Goldman Sachs downgraded the stock to 'sell' from 'neutral' and reduced the target price by 99 rupees to 742 rupees. Goldman Sachs sees multiple headwinds for the bank as return on assets as well as profitability has peaked and growth is under pressure, media reports said. Analysts with the brokerage also expect a likely de-rating in valuation for the bank. 

According to Goldman Sachs, SBI's risk-reward profile is becoming increasingly unfavourable due to growing obstacles impacting the sustainability of its return on assets. It also anticipates a slowdown in loan growth due to a widening gap between deposit and loan growth, reports said, attributing the foreign broking firm. It further said the bank has been losing market share in deposits over the past four quarters, and this is expected to continue.  

Shares of Vodafone Idea ended 11.5% lower at 13.35 rupees and were the worst performers on the Nifty 200 and the Nifty 500. The stock fell after Goldman Sachs said it expects it to fall over 80% from current levels in anticipation of a further fall in the company's market share, as per various media reports. The brokerage has a target price of 2.5 rupees on Vodafone Idea as the brokerage expects the company to lose market share by 3 percentage points over the next 3–4 years. 

On the upside, shares of LTIMindtree and Bajaj Finance were among the top gainers in the Nifty 50 after bullish remarks from foreign brokerages. Shares of Bajaj Finance ended in the green after brokerage firm Jefferies raised its target price by 8% to 8,410 rupees.

LTIMindtree shares rose after foreign brokerage firm Morgan Stanley reportedly raised the stock's rating to 'overweight' from 'equalweight'. It also raised its target price to 7,050 rupees from 6,070 rupees and expects the company to outpace its larger counterparts in growth, as per media reports. The brokerage noted the company's shift towards larger cost-saving annuity contracts compared to the previously short-term discretionary projects. This could result in better revenue growth visibility and the potential resurgence of short cycle deals, the brokerage said, as per media reports. 

Further, shares of SBI Cards and Payment Services ended over 4% higher at 800.65 rupees and were the top gainers on Nifty 200 index. They rose after Goldman Sachs upgraded the stock to 'buy' from 'sell' and raised the target price to 913 rupees from 652 rupees earlier.

Godfrey Phillips India's stock recovered and surged to a record high of 7,320 rupees after the company said its board will consider a a two-for-one bonus share issue. The stock, which was down 1.3% before the update, closed 11% higher and was the top gainer in the Nifty 500 index.   

* Of the Nifty 50 stocks, 7 rose and 43 fell

* Of the Sensex stocks, 6 rose and 24 fell

* On the NSE, 843 stocks rose, 1,900 fell, and 75 were unchanged

* On the BSE, 1,403 stocks rose, 2,544 fell, and 87 were unchanged

* Nifty PSU Bank: down 3.6%; Nifty Oil & Gas: down 2.2%; Nifty Bank: up 1.7%

BSE                                               NSE
Sensex: 81183.93, down 1017.23 points, or 1.2%    Nifty 50: 24852.15, down 292.95 points, or 1.2%

End

Edited by Deepshikha Bhardwaj

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