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Informist, Monday, Oct. 21, 2024

By Anjana Therese Antony

MUMBAI – Analysts believe developments in global markets and domestic corporate earnings will determine the Indian stock market's direction Tuesday following a choppy session Monday. The continued weakness in the market, which has been through a three-week losing streak, can be attributed to expensive valuations, the anticipation of a slowdown in earnings growth, foreign portfolio investors continuing to pull their money out, and rising tensions between Iran and Israel, analysts said. But for selective pockets in banks, all other sectors are considered to be expensive, which may lead to comparatively lower returns from the equity market this year, experts said.

"The current weakness was expected, particularly after the market rallied so much on the US rate cut," an analyst at a domestic broking firm said. "With foreign investors putting their money into other markets like China, especially after their stimulus measures announced recently, the trend may continue in the near term." Elara Securities said about 50% of foreign fund redemption from China since August 2023 has been recouped in just four weeks.

The Nifty 50 closed 0.3% lower at 24781.10 points Monday and the BSE Sensex ended 0.1% lower at 81151.27 points, with about 73% of stocks listed on the National Stock Exchange closing in the red. The near-term support for the 50-stock index is seen at 24600-24500 points and the resistance at 24900-25000 points, according to technical and derivatives analysts at two broking firms.

The rise in the fear gauge, India VIX, hints at near-term nervousness in the market. The volatility index closed 5.6% higher at 13.7625, up after falling for two consecutive weeks. Most sectoral indices ended lower, while automobile and financial services stocks were the outliers, ending marginally higher.

"Taking into account the Nifty 50 EPS (earnings per share) cut of 1.5% in recent weeks and factoring the slower-than-expected economic recovery in our probabilities, we have cut blended Nifty 50 target by 3% to 25978 (points), an upside of just 5%," InCred Equities said in its strategy report. The rich MSCI India valuation in comparison to peers and earnings disappointment are likely to result in a sharp stock price correction, the broking firm said.

Shares of index heavyweight HDFC Bank are likely to rise some more Tuesday, supported by higher-than-expected earnings for the September quarter. The stock closed nearly 3% higher at INR 1,728.70 despite the slight increase in its non-performing assets and a loan-to-deposit ratio of 99.8%. The bank said it expects to reduce this ratio to 86% in 2-3 years. 

Shares of Kotak Mahindra Bank, which ended 4.4% lower at INR 1,789.20 amid concerns about asset quality and declining net interest margin, may extend losses Tuesday. However, analysts expect the bank to deliver healthy growth in advances and net interest income over the current and next two financial years.

Large-cap player Bajaj Finance is scheduled to release its results Tuesday. The company is expected to post 30% on-year growth in consolidated net profit to INR 46.08 billion and net interest income is seen rising at the same pace to INR 93.92 billion, as per the average of estimates from eight broking firms. The stock closed 1.7% lower at INR 6,780.90 on the National Stock Exchange Monday. Other companies due to release their quarterly results Tuesday include Adani Green Energy, ICICI Prudential Life Insurance Co., Varun Beverages, and Coforge. 

On the global front, US September employment and unemployment data will be released Tuesday at 1930 IST. The US jobs-related data has been widely tracked by global investors for clues about the US Federal Reserve's interest rate trajectory.  End

Edited by Rajeev Pai

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