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Informist, Tuesday, Oct. 15, 2024

By Alina Geogy

MUMBAI – Benchmark indices are likely to fall further Wednesday as anticipation of subdued earnings for the September quarter may discourage investors, analysts said. While overstretched valuations and continuing geopolitical issues may also affect sentiment, investors may find some respite in the fact that selling by foreign portfolio investors has been decreasing over the past few days.

Investors now eagerly await the September quarter earnings of Bajaj Auto, due Wednesday, especially after the results of some companies failed to meet expectations. The two-wheeler maker is expected to report strong earnings growth for Jul-Sept driven by healthy growth in volumes, price hikes, better realisations, and operating leverage.

Meanwhile, shares of those companies that reported weaker-than-expected earnings for Jul-Sept are expected to fall more Wednesday, analysts said. Shares of Tata Consultancy Services may extend losses for the seventh consecutive session, while Reliance Industries may fall for the second straight session. However, global brokerage Jefferies said the sharp 14% correction seen recently in shares of Reliance makes the stock's valuation favourable, as per news reports. Jefferies has retained a 'buy' rating on the stock.

Shares of index heavyweight Reliance Industries fell over 2% Tuesday after the company's consolidated net profit for Jul-Sept fell 5% on year, owing to weak earnings in its oil-to-chemicals and retail businesses. While demand in the oil-to-chemicals segment is expected to bounce back, it will not be meaningful as demand from China is not picking up, a research associate covering the sector at a major domestic brokerage said. The retail segment is also facing challenges owing to weak demand, the research associate said.

On the other hand, the company's Jio business is expected to give a "good bump-up", the research associate said. The average revenue per user of Jio Platforms is expected to rise further in the coming quarters, which will help in expansion of margins, the associate said. The average revenue per user of the business rose in Jul-Sept, aided by tariff hikes, after remaining unchanged for four quarters. The company has been aggressive in expansion, but the numbers are yet to pay off. The company may now need to slow down its expansion to boost margins, the associate said.

Besides corporate earnings, investors will also look to global cues. Prices of crude oil, which have been declining for the past three days, are expected to boost shares of oil marketing companies. These stocks have risen for at least two straight sessions. On the Intercontinental Exchange, the December futures contract of Brent Crude fell over 4% to $74.17 per barrel at 1854 IST. Crude oil prices fell sharply Tuesday after the Organization of the Petroleum Exporting Countries lowered its forecast for demand growth in 2024 and after news reports said Israel would not strike Iranian oil facilities.

The Nifty 50 closed 0.3% lower at 25057.35 points on Tuesday and the BSE Sensex closed 0.2% lower at 81820.12 points. The immediate support for the 50-stock index is seen at 25000 points and the next support is seen at 24920 points, analysts said. The resistance for the Nifty 50 is seen at 25200 points.

The selling by foreign institutional investors in the Indian equity market for over 10 sessions had dampened sentiment. So far in October, FPIs net sold shares worth nearly INR 600 billion, as of Monday. These outflows followed stimulus measures announced by China recently, aimed at boosting its economy.

Investors may also track comments by US Federal Reserve Governor Adriana Kugler at an event later in the day. Investors have been watching for clues about the Fed's next interest rate decision ahead of its next monetary policy meeting, which is less than a month away. Over 90% of interest rate traders currently believe the Fed may cut rates by 25 basis points at its November meeting, according to the CME FedWatch Tool. Investors will also assess the European Central Bank's interest rate announcement, due Wednesday.  End

US$1 = INR 84.03

Edited by Rajeev Pai

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