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Informist, Friday, Oct. 4, 2024

By Alina Geogy

MUMBAI – Investors' sentiment is likely to be hit Monday, too, on the back of growing apprehensions over geopolitical tensions in West Asia, outflows by overseas investors, stretched valuations, and restrictions in the derivatives market imposed by the market regulator, analysts said. However, investors may find some respite from the latest monthly employment data from the US, which pointed to a strong pick-up in the pace of hiring in September. 

Employers in the US added 254,000 in September, higher than the estimated addition of 150,000, according to a Dow Jones. The unemployment rate in the world's largest economy fell to 4.1%, signalling that the economy had continued momentum the very month that the US Federal Reserve announced its first interest-rate cut in four years. 

The labour market data comes ahead of the presidential election in the US next month, where the economy and inflation are key issues for voters. These are also closely monitored by the US Federal Reserve to decide on the interest rate trajectory. The expectation of a further 50-basis-point rate cut by the US Fed in November has fallen to 11%, according to the CME FedWatch Tool, from 32% Thursday.

Back home, the Nifty 50 closed 0.9% lower at 25014.60 points Friday and the BSE Sensex ended 1% lower at 81688.45 points. Both the indices have fallen 4.5% in four trading sessions this week. The weakness in the market was due to concern about the escalating conflict between Israel and Iran and reports that foreign investors are diverting funds to China after its recent economic stimulus.

Expensive stock valuations are also likely to deter investors from making fresh investments. Analysts were positive on metal stocks on the China stimulus and select financial and private banking stocks where valuations are fairly reasonable. Foreign institutional investors net sold shares worth INR 98.97 bln, provisional data on the National Stock Exchange Friday showed. This was slightly lower than the net sale of shares worth INR 155.07 bln on the bourse Thursday.

Investors also assessed data about the domestic services sector in India. In September, the services sector expanded at its weakest pace in 10 months, with the HSBC Purchasing Managers' Index falling to 57.7 from 60.9 in August, data released by S&P Global on Friday showed. This is the first time in 2024 that the services PMI has come in below 60.

The market will also gear up for the corporate earnings season, which kicks off next week, for the September quarter. Emkay Global Financial Services expects a steady quarter for information technology companies and said the revenue growth of these companies is likely to reflect the steady demand environment and usual seasonal strength, although discretionary spending is yet to recover. Though a major improvement in the demand environment is not expected, there are views that the next financial year will see an uptick in discretionary spending, more hiring, and deal wins.

For fast-moving consumer goods players, Elara Securities believes demand for FMCG products in Jul-Sept remained stable, with growth in the rural market outperforming than urban for the third consecutive quarter, albeit on a favourable base.

For financial companies, experts echoed that financials stocks are the only ones where valuations remain reasonable. Elara Securities expects an overall earnings growth of 10-12% for banks and financial companies for the September quarter. It expects 5-10% growth for private lenders and 15-18% growth for state-owned banks. Major focus will be on management comments on net interest margin growth, credit-deposit ratio, and credit costs.  End

Edited by Akul Nishant Akhoury

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