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Informist, Wednesday, Oct. 23, 2024

By Alina Geogy

MUMBAI – Benchmark indices failed to sustain an intraday recovery and ended in the red for the third consecutive session Wednesday, a day after the 1% fall Tuesday. Worries about weak corporate earnings growth are still weighing on the market, coupled with record selling by foreign portfolio investors this month and discouraging valuations, analysts said. The broader market, which bore the brunt of a massive sell-off Tuesday, recovered after brief losses in early trade due to an extremely oversold condition, they said.

Nearly 60% of all NSE-traded stocks ended with gains, a relief for investors who saw a whopping 86% of stocks ending in the red just a day back. After a rather choppy session, the Nifty 50 closed at 24435.50 points, down 36.60 points or 0.2%. The 50-stock index is now down 7% or over 1800 points from its all-time high of 26277.35 points it hit on Sept. 27. To put it differently, the benchmark index is down 7% since the latest quarter ended. The BSE Sensex ended at 80081.98 points, down 138.74 points or 0.2%.

After a weak opening, the key indices bounced back sharply but fell again due to selling pressure at higher levels, Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. "The intraday market texture is weak but oversold", hence a quick pull-back rally can be expected if the Nifty 50 manages to rise above 24600 points, he said.

Information technology stocks were the best performers Wednesday, with the Nifty IT index rising over 2% and significantly outperforming other sectoral indices. Shares of Tech Mahindra, Tata Consultancy, HCL Technologies, and Infosys rose 1-2% and limited the decline in both benchmarks. This sector gained after strong earnings and positive management commentary by mid-cap firms Coforge and Persistent Systems. So far, most information technology firms, especially large-cap ones, have failed to impress investors owing to weak September quarter earnings, lower-than-expected revision in guidance, or weak demand outlook.

The Nifty IT snapped a three-day losing streak Wednesday. The Nifty Pharma index, the worst-hit sectoral index, fell for the third straight session, along with the Nifty Bank, Nifty Metal, and Nifty Energy indices. The Nifty small-cap indices rose over 1% each and the Nifty mid-cap ones also closed with modest gains.

Pharmaceuticals was the worst-hit sector, with most constituents in the Nifty Pharma index ending in the red. Of these, shares of Sun Pharmaceutical Industries, Lupin, and Alkem Laboratories fell 2-5% and were the worst hit. Pharmaceutical stocks have been largely range-bound for the last two months, in comparison with other sectors which have been more volatile. Indian drugmakers are expected to post strong earnings growth for the September quarter, aided by increased sales in the US and more manufacturing contracts as global pharmaceutical companies turn to other countries in a hunt for alternatives to China, analysts said.

For yet another day, action was highly stock-specific as investors rewarded and punished companies for their quarterly earnings. Nifty 50 constituent Bajaj Finance is the latest entrant to the long list of companies which reported lower-than-expected earnings growth for the September quarter. Following the firm's earnings, several brokerage firms cut their earnings estimates, citing higher credit costs, and also cut target prices for the stock. Despite this, the stock rose nearly 5%, marking its second largest single-day gain this calendar year. The company's earnings growth and profitability are expected to improve in 2025-26 (Apr-Mar) and its valuation is reasonable, analysts said.

Persistent Systems said it hopes to deliver robust growth in the coming quarters on the back of a healthy order book and pipeline, after which strong buying momentum took the stock up 11%. Shares of One 97 Communications, parent company of Paytm, rose 8.5% after the company reported a profit for the September quarter for the first time since the stock's listing in 2021 and said it was now allowed to onboard new users for its Paytm app.

Shares of SRF gained 3% after the management gave positive commentary despite a larger-than-expected fall in net profit for the quarter. The multi-business chemicals company said demand in India and West Asia was growing on the back of rising air conditioning needs and expects demand for agrochemicals to rise gradually in Oct-Mar, aided by a strong order book. Shares of Amber Enterprises India rose 13% as the company posted a consolidated net profit of INR 192.48 million for the September quarter compared to a loss of INR 69.47 million a year ago.

On the other hand, shares of Chennai Petroleum Corp. fell nearly 11% after the company posted a consolidated net loss in Jul-Sept compared to a net profit a year ago. Shares of Mahindra & Mahindra Financial Services fell 5% after the company's net profit for Jul-Sept missed analysts' estimates. Shares of TVS Motor fell sharply and ended down nearly 4% after the company's net profit and revenue for the September quarter missed analysts' estimates.

Shares of Deepak Fertilisers & Petrochemicals Corp., Amber Enterprises, and Firstsource Solutions rose 12-17% and were the top gainers in the Nifty 500 index, while those of Chennai Petroleum Corp. and Rajesh Exports fell 8-11% and were the worst hit. Meanwhile, shares of the latest exchange debutant, Hyundai Motor India, rose 4% to close at INR 1,896.85 on the NSE. However, the stock is still 3% below its issue price of INR 1,960.

The India VIX, an indicator of volatility in the market, rose for the third straight day, and closed nearly 2% higher at 14.6225. The rise in this indicator has been hinting at a growing concern among investors, analysts said. With this rise, the index is nearing its one-month high of 15.55 which it hit two weeks back.

* Of the Nifty 50 stocks, 20 rose and 30 fell

* Of the Sensex stocks, 9 rose and 21 fell

* On the NSE, 1,632 stocks rose, 1,150 fell, and 77 were unchanged

* On the BSE, 2,096 stocks rose, 1,827 fell, and 108 were unchanged

* Nifty Pharma: down 1.6%; Nifty Healthcare: down 1.4%; Nifty IT: up 2.4%

BSE                                               NSE

Sensex: 80081.98, down 138.74 points or 0.17%     Nifty 50: 24435.50, down 36.60 points or 0.15%

End

Edited by Ashish Shirke

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