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Informist, Tuesday, Oct. 22, 2024

By Alina Geogy

MUMBAI – The domestic market may reel under selling pressure for yet another day over disappointment on weaker-than-expected corporate earnings for the September quarter and persistent selling by foreign portfolio investors for most days this month, analysts said. Further, expensive valuations and fall in global markets are also likely to weigh on the market.

The broader market, which saw a sharper sell-off in comparison to the benchmark indices Tuesday, is likely to fall more Wednesday. Several stocks in this category had risen significantly in the past few months in anticipation that these companies would report strong earnings growth in upcoming quarters, analysts said. However, these stocks are now falling as more companies announce Jul-Sept earnings lower than analysts' estimates or give a weak outlook for growth, they said.

There was also a 'pump and dump' strategy or euphoria-like buying that had played out over the last few months in expectation of robust corporate earnings growth, a research analyst at a domestic broking firm said. While some investors are beginning to pull their money out of the market, it is the retail individuals that may be getting trapped, the analyst said.

Persistent selling by foreign portfolio investors to the tune of INR 721 billion so far this month is denting sentiment as market participants assess the rationale behind these sales. This net selling by foreign portfolio investors comes after four consecutive months of buying Indian shares. "FII data has not yet reached oversold", indicating that the selling by this category of investors is likely to continue over the coming days, the head of research at a domestic brokerage firm said.

Selling by foreign institutional investors increased from a day ago. Tuesday, these investors net sold shares worth INR 39.78 billion, nearly double the sales of INR 22.62 billion on Monday, as per provisional data. In comparison, domestic institutional investors net bought shares worth INR 58.69 billion. The India VIX, the fear gauge of the market, rose for the second straight day, and closed 4.6% higher at 14.3950. The rise in this indicator also hints at growing concern among investors.

Support for the Nifty 50 lies at 24200-24300 points and on the resistance side, 24650-24700 points is seen as an immediate hurdle, Rajesh Bhosale, equity technical analyst at Angel One, said in a note. Tuesday, the Nifty 50 closed at 24472.10 points, down 1.3%. The BSE Sensex closed at 80220.72 points, down 1.2%. All sectoral indices and broader market indices ended sharply lower.

"Traders should avoid taking long positions until there are clear signs of a bullish reversal," he said. "The midcap space, in particular, saw a sharp decline, breaking below key support levels, signalling more pain ahead — bottom-fishing in this sector should be avoided for now," he said.

Quarterly earnings of Nifty 50 companies Bajaj Finserv, Hindustan Unilever, and SBI Life Insurance are scheduled Wednesday. Investors will also keep an eye on the earnings of Godrej Properties, Pidilite Industries, TVS Motor, and United Spirits. They will also react to the earnings of Bajaj Finance, Indus Towers, Can Fin Homes, Chennai Petroleum Corp and others announced after market hours Tuesday. Bajaj Finance's consolidated net profit for Jul-Sept rose to INR 40 billion from a year ago, but did not meet analysts' expectations of INR 46.08 billion.  End

Edited by Ashish Shirke

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