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Informist, Monday, Oct. 21, 2024

By Alina Geogy

MUMBAI – Benchmark equity indices gave up brief early gains and ended lower Monday as losses in most information technology stocks and select fast-moving consumer goods stocks weighed on the indices. This decline was limited by gains in select heavyweight stocks. Investors reacted to the quarterly earnings, especially those of Nifty 50 majors which were released after market hours Friday and over the weekend.

The muted earnings reported so far by companies for the September quarter have hit investor sentiment. This has exacerbated the underlying problem of persistent sales by overseas investors and stretched valuations, analysts said. Foreign portfolio investors have net sold shares worth INR 777 billion in October till Friday. The Nifty 50 ended at 24781.10 points, down 0.3%, and the Sensex ended at 81151.27 points, down 0.1%. With this fall, both indices have extended losses into the fourth consecutive week. Of all stocks traded on the NSE, 73% ended with losses Monday, while only 24% ended with gains. The Nifty 50 is now down 3.9% from its Sept. 30 close.

Fast-moving consumer goods player Tata Consumer Products and private lender Kotak Mahindra Bank were the worst-hit stocks on the Nifty 50. The decline in both stocks follows their September quarter earnings announcements. Shares of information technology majors Tata Consultancy Services and Infosys also weighed on the index. On the other hand, shares of HDFC Bank and Tech Mahindra, which posted better-than-expected profits for the September quarter, ended up almost 3% and 1%, respectively, 

Shares of Tata Consumer Products fell 7% to a near 10-month low after several brokerages highlighted concerns over the increasing cost of tea and salt, which the company buys and sells as processed and packaged goods. This could put pressure on margins in the coming quarters, analyts said. The earnings disappointed because of a combination of high consumer inflation impacting urban demand, a sharp spike in material costs, a delay in price increases, and an unusual impact on sales in the ready-to-drink business, Nirmal Bang Institutional Equities said.

Shares of Kotak Mahindra Bank fell over 4% to an over one-month low after the bank's earnings for the September quarter missed the Street's expectations. Despite this, some brokerages retained their ratings on the stock. Analysts raised concerns over the bank's asset quality and declining net interest margin.

Shares of another Nifty 50 company, UltraTech Cement, also fell after its quarterly earnings, released during market hours Monday, disappointed. The stock extended losses and ended down nearly 2% after the company's consolidated net profit for the September quarter fell 36% on year to INR 8.2 billion, much lower than the INR 9.9 billion expected by analysts.

Shares of index heavyweight HDFC Bank rose nearly 3% after the bank reported an over 5% on-year increase in its September net profit, which beat analysts' expectations even though it was the lowest growth in 17 quarters. Some of the key positives in the September quarter include net interest margins being stable sequentially and a marginal improvement in cost ratios, as the cost-to-income ratio moderated on year, Nirmal Bang Institutional Equities said.

Shares of Tech Mahindra rose as much as 4.4% in early trade to an over two-year high after the company's consolidated net profit for Jul-Sept beat analysts' estimates, rising nearly 47% on quarter, the highest sequential growth in at least 20 quarters. The better-than-expected earnings were aided by more deal wins during the quarter, improved performance in its core communication segment, and cost optimisation measures.

"The company delivered a beat in Q2, with executions in line with its targets for FY27," Vaibhav Chechani, research analyst at Nirmal Bang Institutional Equities said. The management's commentary on demand, headcount, and margins was largely in line with estimates, he said. Tech Mahindra has started making steady progress towards its target for 2026-27 (Apr-Mar), Elara Capital said.  The company aims to achieve an operating margin of 15% by FY27, as part of its three-year margin expansion programme called 'Project Fortius'.

Tejas Networks and Netweb Technologies India also rose on the back of robust quarterly earnings. Shares of Tejas Networks gained 11% after the telecommunication equipment firm posted a consolidated net profit of INR 2.75 billion for the September quarter, against a loss of INR 126.4 million in the year-ago quarter. Shares of Netweb Technologies ended up over 2%, but off the 10% rise to a record high earlier in the day. The high-end computing solutions provider reported robust earnings growth for the September quarter, with the net profit surging nearly 66% and revenue rising 68% on a sequential basis. 

Shares of RBL Bank, IndiaMART InterMESH, and CG Power and Industrial Solutions declined sharply after their quarterly earnings fell short of expectations. Shares of RBL Bank hit a 16-month low and fell 14% after some brokerage firms downgraded the stock's ratings and reduced the target price. The sell-off followed a 24% on-year decline in the bank's net profit for Jul-Sept. The bank reported a lower profit due to a slowdown in microfinance disbursements, elevated slippages in credit cards and microfinance business, and compression in net interest margin, Nirmal Bang said.

Shares of IndiaMART InterMESH fell 18% after some brokerage firms gave bearish comments despite the company's consolidated net profit rising 95% on year. Nuvama downgraded the stock's rating to 'reduce' from 'hold' due to "lower growth profile" and an unexpected slowdown in collections for the quarter. Shares of CG Power turned negative and ended down 5% after higher cost of raw materials led to an on-year decline in the company's consolidated net profit for the September quarter. 

Among other stocks in focus, shares of PNC Infratech hit the 20% lower circuit after the company was disqualified by the road transport ministry for a year based on a first information report filed by the Central Bureau of Investigation in June. The case relates to alleged bribing by the company's employees. ICICI Direct Research downgraded the stock to 'hold' from 'buy' and cut its target price. PNC Infratech said it had filed a writ petition in the Delhi High Court, challenging the order passed by the ministry.

Among sectoral indices, the Nifty Auto and Nifty Financial Services were the only ones to end higher. Nifty Media and Nifty Metal were the worst hit among sectoral indices. The broader market underperformed benchmark indices, with the Nifty mid-cap indices falling as much as 2%.

* Of the Nifty 50 stocks, 15 rose and 35 fell

* Of the Sensex stocks, 9 rose and 21 fell

* On the NSE, 697 stocks rose, 2,128 fell, and 87 were unchanged

* On the BSE, 1,102 stocks rose, 2,948 fell, and 125 were unchanged

* Nifty Media: down 2.8%; Nifty Metal: down 1.5%; Nifty Auto: up 0.4%

BSE                                               NSE

Sensex: 81151.27, down 73.48 points or 0.09%      Nifty 50: 24781.10, down 72.95 points or 0.29%

End

Edited by Tanima Banerjee and Avishek Dutta

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