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Informist, Friday, Oct. 18, 2024

By Alina Geogy

MUMBAI – Though the benchmark indices snapped a three-day losing streak Friday, the market closed in the red for the third successive week. The outflow of foreign portfolio investor funds, anticipation of a slowdown in corporate earnings, and expensive valuations continued to make investors pull money out, analysts said. Gains in most banking stocks offset the sharp losses in select information technology stocks. Activity was highly stock-specific as investors reacted to the Jul-Sept earnings and commentaries of companies.

Earlier in the day, the benchmark indices extended losses from the previous session owing to early losses in some heavyweight stocks such as Reliance Industries and Larsen & Toubro. The indices then turned positive in the latter part of the day's trading session owing to gains in most banking and metal stocks. The Nifty 50, which had fallen 1.5% over the past three days, ended at 24854.05 points, up 0.4%. The BSE Sensex ended at 81224.75 points, up 0.3%.

The gains in the market were the result of a "technical pullback" after losses over the past few sessions, Ruchit Jain, lead research analyst at 5paisa, said. The indices have been in a "corrective phase" this month mainly because of persistent selling by overseas investors, he said. Foreign institutional investors are creating short positions in index futures and even selling aggressively in the cash segment, which has led to the decline in the index, he said. The long-short ratio of the October series has fallen to 33% now, compared to 81% at the start of the series, he said.  Foreign portfolio investors net sold shares worth INR 777 billion so far this month on the exchanges. 
 

Shares of Axis Bank and Wipro shone Friday, rising sharply to become the top gainers in the Nifty 50 index. Shares of Wipro gained nearly 4% on the back of the company's better-than-expected consolidated net profit for Jul-Sept and a positive outlook by several brokerages. The company's board also approved a one-for-one bonus issue of shares. Shares of Axis Bank rose nearly 6% as the lender's net profit for the September quarter rose 18% on year, meeting the expectations of most analysts. The bank's net profit grew because of a rise in income and a marginal improvement in asset quality.

Shares of IT giant Infosys fell 4.5% to be the worst-hit Nifty 50 constituent after the company's profit fell short of analysts' expectations, though it reported sequential growth in both consolidated revenue and net profit for Jul-Sept. Even the revision in guidance was lower than expectations. The company raised its revenue growth guidance in constant currency terms to 3.75-4.50% for 2024-25 (Apr-Mar), from 3-4% earlier. Analysts had expected the guidance to be in the range of 4-5%.

As investors assessed the quarterly results of more companies, shares of Zee Entertainment Enterprises extended gains and ended 5% higher after the company's consolidated net profit for Jul-Sept beat analysts' estimates. Shares of Elecon Engineering Co. extended early losses and fell a whopping 13% after the company's consolidated net profit for Jul-Sept fell slightly on year.

Among other stock-specific reactions, shares of LTIMindtree fell 7% after the company said a hike in wages may hit its margin by up to 200 basis points in the December quarter. That the company had reported better-than-expected earnings for Jul-Sept did not prevent the stock falling to a one-month low. Shares of Polycab India, Tata Chemicals, and Tanla Platforms also fell a day after they announced their earnings. The revenue of Tanla Platforms for the September quarter fell sequentially, while the consolidated net profit of Tata Chemicals for the quarter fell 55% on year.

Shares of city gas distribution companies fell sharply and were the worst performers in the broader market owing to concerns that their profitability would be hit after the government cut the allocation of gas to these companies by around 20%. Shares of Mahanagar Gas and Indraprastha Gas fell over 10% each to their lowest levels in around four months. City gas distributors are of the view that prices of compressed natural gas may need to go up by as much as INR 6 per kg, according to a CNBC TV18 report.

With rising dependence on market-linked gas, city gas distributors would be forced to defend margins at the expense of volume growth, Jefferies said. This could trigger a de-rating for the sector, the brokerage said. Jefferies said it would revisit its estimates for the companies after pricing changes by the players.

Shares of Manappuram Finance also fell sharply after the Reserve Bank of India directed the company's arm, Asirvad Micro Finance, to cease sanctioning and disbursing loans from Monday citing material supervisory concerns in its pricing policy. Brokerage Jefferies downgraded the stock to 'hold' from 'buy' and also slashed its target price, as it believes the RBI's order would hurt Manappuram's earnings.

Among sectoral indices, Nifty Private Bank and Nifty Metal rose nearly 2% each to become the top gainers. On the other hand, Nifty IT, Nifty FMCG, and Nifty Oil & Gas were the only sectoral indices to end in the red. Most broader market indices were higher, with the Nifty mid-cap indices mirroring the gains in the benchmark indices.

* Of the Nifty 50 stocks, 32 rose and 18 fell

* Of the Sensex stocks, 19 rose and 11 fell

* On the NSE, 1,349 stocks rose, 1,411 fell, and 83 were unchanged

* On the BSE, 1,923 stocks rose, 2,014 fell, and 106 were unchanged

* Nifty Private Bank: up 1.9%; Nifty Metal: up 1.6%; Nifty IT: down 1.5%

BSE                                               NSE

Sensex: 81224.75, up 218.14 points or 0.27%       Nifty 50: 24854.05, up 104.20 points or 0.42%

End

Edited by Rajeev Pai

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