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Informist, Friday, Oct. 18, 2024

By Alina Geogy

MUMBAI – Benchmark indices may fall again Monday as sentiment may be affected by the recent subdued earnings of some companies, weak management commentary and continued selling by foreign investors, analysts said. The banking sector will be in focus as investors will react to the Jul-Sept earnings of major lenders, such as HDFC Bank and Kotak Mahindra Bank, and information technology firm Tech Mahindra, due Saturday and fast-moving consumer goods firm Tata Consumer Products, released Friday.

September quarter earnings have been a "mixed bag" so far and the market is now turning to the commentary by the management of the companies, analysts said. For instance, shares of Bajaj Auto fell 13% Thursday after the company shared a weak outlook for demand in the festival season. Shares of IT giant Infosys fell 4.5% Friday after the company's profit for Jul-Sept and a revision in guidance for 2024-25 (Apr-Mar) missed estimates.

The larger market texture is still on the weak side, but a fresh sell-off is possible only if the Nifty 50 falls below 24650 points, Amol Athawale, vice-president of technical research analyst at Kotak Securities, said in a note. Below this, the index could fall to 24500-24450 points, he said. On the flip side, 24900 points could be the immediate resistance zone, after which the pull-back momentum is likely to continue till 25000-25050 points, he said. On Friday, the Nifty 50 closed 0.4% higher at 24854.05 points and the BSE Sensex ended at 81224.75 points, up 0.3%.

Shares of Tata Consumer Products may gain Monday after the company's Jul-Sept earnings were better than expectations. The company's consolidated net profit was INR 3.64 billion, up nearly 8% on year, the highest growth rate in five quarters. Investors will also assess the management's comments at the conference call scheduled Friday.

Nifty 50 constituents HDFC Bank and Kotak Mahindra Bank will announce their earnings on Saturday. HDFC Bank's net profit is expected to rise 2.9% on year in Jul-Sept as efforts to bring down its loan-to-deposit ratio will likely hit its net profit. Kotak Mahindra Bank's net profit in Jul-Sept is expected to rise 9.1% on year as moderation in margins and higher operating expenses due to the Reserve Bank of India's ban on digital on-boarding of new customers for the bank may weigh on the bottom line.

So far, September quarter earnings of banks have been "neither great nor bad, somewhat of a non-event", Asutosh Mishra, lead analyst, banking, financial services and insurance, and the head of research of institutional equity at Ashika Stock Broking, said. The valuations of banking stocks are at a historical 10-year low, he said. We can expect some improvement in the deposit mobilisation of banks once the Reserve Bank of India kicks off its liquidity easing cycle, he said.

The non-banking financial sector will be monitored closely for more crackdowns by the Reserve Bank of India after it ordered four non-bank lenders to cease sanctioning and disbursing loans from Monday. The RBI curbs cited material supervisory concerns in the pricing policies of loans and other regulatory violations. Among the companies directed to cease loan disbursal was Manappuram Finance's subsidiary Asirvad Micro Finance. On Friday, shares of Manappuram Finance fell nearly 14%, making it the worst hit in the Nifty 500 index.

The RBI had already given an "alarm signal" to non-banking lenders after the last Monetary Policy Committee meeting, which was held hardly 10 days back, and now the central bank has taken action, Mishra of Ashika Stock Broking said. We can expect more such orders from the RBI aimed at regulating the sector, he said. In his statement after the MPC meeting, Governor Shaktikanta Das said that a few "outliers" in the non-banking space were chasing "excessive returns on their equity". 

UltraTech Cement will detail its quarterly earnings on Monday. The cement manufacturer is expected to report an on-year and on-quarter fall in its consolidated net profit in Jul-Sept because of sluggish sales volume, a drop in operating leverage, and lower realisations due to a correction in cement prices.

Among other stocks, shares of Garden Reach Shipbuilders may rise after the company said it received an INR 4.91-bln contract from the defence ministry. Shares of JSW Steel will also be eyed after the company's board approved the acquisition of thyssenkrupp Electrical Steel India for INR 40.5 billion, through a 50-50 joint venture with Japan-based JFE Steel Corp. End

Edited by Saji Geoge Titus

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