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Informist, Monday, Oct. 7, 2024

By Alina Geogy

MUMBAI – Indian equities may continue their southward journey Tuesday due to outflows from foreign funds, expectations of dismal Jul-Sept earnings, and festering conflict in West Asia, analysts said. Investors now await the Reserve Bank of India's monetary policy outcome due Wednesday and Tata Consultancy Services' Jul-Sept results due Thursday.

The benchmark indices declined for the sixth consecutive session Monday, losing around 6% each during the period. On Monday, the Nifty 50 closed at 24795.75 points, down 0.9% or 218.85 points, while the BSE Sensex closed at 81050 points, down 0.8% or 638.45 points.

Corrections in the market are healthy, especially when one takes into account the pace at which the indices had risen for several weeks, analysts said. The ongoing correction in the market was bound to happen, and it seemed as though investors were looking for an opportunity to book profits, they said. Escalation in the conflict between Israel and Iran last week acted as a major trigger for the sell-off as well as the concerns about supply disruption in crude oil, pushing the commodity's prices higher.

Some analysts believe that the current fall in the market should be seen as a good opportunity for investors to churn their portfolios. They expect a relief rally in the market after losses for a few more sessions.

Investor sentiment is being affected by the recent selling by foreign investors amid reports of funds being diverted to China. Global flow activity last week was focused mostly on China, with the week's foreign inflows into Chinese funds at a historic high of $6.2 billion, Elara Securities said in a report Friday. While domestic institutional investors are buying shares in the bear market, it is not enough to keep the markets up, analysts said.

Foreign institutional investors net sold shares worth INR 82.93 billion on the exchanges on Monday, according to provisional data from the National Stock Exchange. In comparison, domestic institutional investors net bought shares worth INR 132.45 billion during the day.

Now, market participants will turn to domestic events to decide the way forward. On Wednesday, the RBI's Monetary Policy Committee is largely expected to keep the repo rate steady at 6.50% for the tenth meeting in a row. However, some market participants believe that the committee would change its stance to 'neutral' from 'withdrawal of accommodation'.

"While the recent US Fed cut would have prompted the RBI to follow suit, the fact is that the global economy is facing considerable uncertainty because of the ongoing geopolitical tensions," Anuj Puri, chairman of ANAROCK Group, said in a note. "It is a tightrope walk for the RBI, and it is therefore possible that it will hold on to the current repo rate for now, until these pressures ease."

Market participants are not very optimistic about the corporate earnings for the September quarter over worries that several firms may report weak earnings growth. The preview for information technology firms indicated that there isn't much to cheer about, especially as the demand trend for this sector is yet to improve, analysts said. Though the quarterly updates by banks for Jul-Sept were largely alright, banking stocks are seen technically weak in the upcoming sessions, likely affected by the overall weakness in the market. 

Among specific stocks, shares of Nifty 50-constituent Bharat Electronics may gain after the state-owned firm said it received orders worth over INR 5 billion. The orders include those for electromagnetic interference shelters, and upgrading or providing spares for gun systems, radars, and communication systems. 

Shares of Tata Motors may fall more after the automaker said its subsidiary Jaguar Land Rover's wholesale sales fell 10% on year to 87,303 units in the September quarter.

End

US$1 = INR 83.98

Edited by Saji George Titus

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