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Informist, Thursday, Oct. 24, 2024

By Alina Geogy

MUMBAI – Benchmark indices ended marginally lower Thursday as sharp losses in some fast-moving consumer goods and mining stocks were slightly offset by gains in banking stocks. Corporate earnings continued to play a key role in deciding stock movement as investors sold shares of Nifty 50-constituents Hindustan Unilever and SBI Life Insurance over disappointment in their quarterly earnings.

September quarter earnings have been a mixed bag so far, resulting in sharp stock reactions in both directions, Amish Shah, research analyst at Taurus Corporate Advisory Services, said. Even a slight disappointment in the quarterly earnings is taking a toll on those stocks, while these are being massively rewarded if the earnings are slightly better than expected, he said. These sharp reactions are an indicator of very high valuations in the market, he said.

After some losses in early trade, the benchmark indices were confined to a very thin range – barely 80 points for the Nifty 50 - in the second half of the session. There is caution in the market now and investors are in a wait-and-watch mode over uncertainties over what path the indices will take next amid expensive valuations and mixed earnings, Shah said. The Nifty 50 ended at 24399.40 points, down 36.10 points or 0.2%, and the Sensex ended at 80065.16 points, down 16.82 points. Both indices fell for the fourth consecutive session, with the Nifty losing 1.8% during this period, and the Sensex falling 1.4%.

Shares of Hindustan Unilever fell 6% to a three-month low after the company's net profit and revenue for Jul-Sept missed analysts' estimates. This marked the stock's second-largest fall since 2020. Some brokerage firms cut earnings estimates and share target prices owing to worries about the pace of overall recovery in the near term because of a slowdown in demand in the urban market.

Another fast-moving consumer goods firm, Colgate Palmolive (India), also reported lower-than-expected growth in its quarterly earnings, after which the stock fell and ended down 3.6%. Consumer goods companies, such as Nestle India and HUL have reported disappointing financial growth in Jul-Sept, with volume growth in low single digits, analysts said. There is a slowdown in demand in the urban markets owing to lower discretionary spending, with satisfactory traction only in specific segments such as premium products, they said. Losses in shares of HUL and Colgate Palmolive dragged the Nifty FMCG down nearly 3%, making it the worst-hit sectoral index.

The Nifty Metal index was among the worst hit sectoral indices in early trade, owing to sharp losses in shares of Hindalco Industries. Shares of Hindalco Industries fell over worries that its US-based subsidiary Novelis would struggle with weak demand after the latter's French competitor Constellium said the outlook for demand, particularly from the automobile industry, was weak. Constellium pointed to a sharp decline in demand in the industrial and automotive segments, which are among the most profitable ones for Novelis. "...We are also more cautious as we head into 2025," with no signs of recovery in the near term, Constellium said.

Shares of Hindalco ended down 3.7% after falling as much as 7% to a six-week low during the day, extending losses for the fourth consecutive session. Among other metal stocks, shares of JSW Steel, Tata Steel, and National Aluminium Co had early losses for a brief while, but soon recovered and ended with gains. In the Nifty Metal index, 10 out of 15 constituents ended in the green.

While metal and fast-moving consumer goods stocks fell, banking stocks gained and helped the Nifty Bank index snap a three-day losing streak. Shares of HDFC Bank, State Bank of India, and ICICI Bank were among the major gainers that helped limit the losses in both benchmark indices. Shares of SBI Life Insurance fell nearly 5% after the life insurer said it would maintain its value of new business margin for the rest of the financial year at 26-27%. For the half year ended September, the value of new business margin was 26.8%.

Shares of Sona BLW Precision Forgings surged nearly 16% after the company's robust earnings growth in the September quarter and positive comments by various brokerage firms. The company's consolidated net profit rose 16% on year in Jul-Sept, aided by strong growth in its battery electric vehicles vertical. Investors are also glad about a potential boost to its earnings after the company said it would acquire the railway equipment division of Escorts Kubota for INR 16 billion, Praveen Poreddy, equity research associate at Kotak Securities, said.

This acquisition is value accretive for Sona BLW, while on the other hand, this divestment of the business is negative for Escorts Kubota, and the sale of the division at a cheap valuation also raised concerns about the latter, Poreddy said. Shares of Escorts Kubota ended down nearly 6%.

There were several stock-specific reactions as investors came to terms with the quarterly earnings of companies. Shares of Westlife Foodworld fell sharply from the intraday high and ended down 3% after the company reported a consolidated net profit of INR 3.58 million for Jul-Sept, missing the expected bottom line of INR 29.9 million. Shares of Ujjivan Small Finance Bank erased early gains and ended down 4% after the bank reported a larger-than-expected fall in its net profit for the September quarter. Shares of KPIT Technologies fell almost 14% after the company's revenue fell short of expectations.

On the other hand, investors rewarded shares of Piramal Pharma after the drug manufacturer said its consolidated net profit for Jul-Sept rose over four times on year. The stock ended up over 17% after hitting an all-time high and was the best performer in the Nifty 500 index. Shares of Adani Wilmar surged after the company reported consolidated net profit of INR 3.11 billion in the September quarter compared to a loss of INR 1.31 bln a year ago.

Shares of another Adani group company, Adani Total Gas ended up nearly 8% and was the second top gainer on the Nifty 200. Around 19 minutes before its earnings were released, shares of Adani Total Gas rose nearly 6% in anticipation of the company's financials. There was a glitch in the earnings filed to the exchange website. Later, after the earnings were released, the stock rose further and was up 10.5%. The company reported a 7.5% increase in consolidated net profit and a 12% increase in consolidated revenue for the September quarter.

The broader market resumed its decline after modest gains Wednesday. Barring the Nifty Smallcap 50, which ended marginally higher, all broader market indices ended in the red. Among these, the Nifty Midcap 50 fell the most and ended down nearly 1%. This index had hit a two-month low in the previous session.

* Of the Nifty 50 stocks, 24 rose and 26 fell

* Of the Sensex stocks, 18 rose and 12 fell

* On the NSE, 1,032 stocks rose, 1,740 fell, and 71 were unchanged

* On the BSE, 1,490 stocks rose, 2,441 fell, and 102 were unchanged

* Nifty FMCG: down 2.8%; Nifty Realty: down 1.1%; Nifty PSU Bank: up 1.2%

BSE                                               NSE

Sensex: 80065.16, down 16.82 points or 0.02%      Nifty 50: 24399.40, down 36.10 points or 0.15%

End

Edited by Tanima Banerjee

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