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Informist, Thursday, Oct. 24, 2024

By Alina Geogy

MUMBAI – Benchmark indices are expected to fall again Friday as selling by foreign portfolio investors is likely to continue and the slowdown in corporate earnings may be a mood-dampener for investors. With this decline, the indices will extend losses to the fifth straight session and clock their fourth straight week of losses.
 

Nifty 50 constituents JSW Steel, Bharat Electronics, Bharat Petroleum Corp., Coal India, and Shriram Finance are slated to announce earnings for the September quarter Friday. Analysts expect stock-specific movement during the session as investors will react to the financial performances of companies. Other key earnings scheduled Friday are those of Cholamandalam Investment and Finance, Hindustan Petroleum Corp., and Torrent Pharmaceuticals, Bank Of Baroda, DLF, Interglobe Aviation, and Macrotech Developers.

Investors will assess earnings of conglomerate ITC, which reported a net profit of INR 50.78 bln for Jul-Sept, up from INR 49.27 billion a year ago. Despite some improvement in the bottom line, it missed analysts' estimates. ITC joined its sectoral peers after it said it experienced subdued demand conditions in the September quarter. The company also said excessive rains and food inflation affected consumption in Jul-Sept. 

Shares of fast-moving consumer goods companies are expected to fall more in the near term as more companies report weaker-than-expected earnings and provide a weak outlook for growth. So far, major companies from this sector, such as Nestle India, Hindustan Unilever, and Colgate Palmolive (India) have posted weaker-than-expected earnings. All three stocks ended lower Thursday, with shares of Hindustan Unilever closing in the red for the eighth consecutive session.

Shares of Oracle Financial Services Software may fall after the company said its consolidated net profit for Jul-Sept fell sequentially. CIE Automotive also reported an on-year decline in its consolidated net profit for the quarter. Chalet Hotels posted a consolidated net loss of INR 1.38 billion for the September quarter compared to a consolidated net profit of INR million a year ago.

Losses in global markets, particularly the US, are expected to rub off on the domestic market. Benchmark US indices had fallen sharply Wednesday, marking their steepest declines in weeks, as a result of weak corporate earnings. Investors will also assess key economic data from the US which were released after market hours Thursday. These include the weekly unemployment insurance claims report, and the flash services and manufacturing PMI for the month of October.

There is a growing uncertainty ahead of the US elections as market watchers debate about the outcome of the upcoming presidential election in the world's largest economy. Besides geopolitical developments, investors will also assess the prospect of a less aggressive US Federal Reserve in cutting rates. Currently, 96.5% of interest rate traders expect the US Fed to cut rates by a further 25 basis points at its meeting two weeks later, while the rest expect the Fed to keep rates unchanged.

Thursday, the Nifty 50 closed 0.2% lower at 24399.40 points and the BSE Sensex closed marginally lower at 80065.16 points. The Nifty 50 is now expected to face resistance at 24450 points and falling below 24350 points may worsen the selling pressure, analysts said.

The Nifty 50 index has been consolidating for the last two sessions following persistent foreign outflows and dull earnings so far, Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services, said in a note. He expects this range-bound move, where the Nifty 50 hovers around the 24400-24500 zone, to continue in the absence of any major triggers, while the earnings season would drive sectoral rotation.

Shares worth nearly INR 810 billion have been sold by foreign portfolio investors in October so far. On Thursday, foreign institutional investors net sold shares worth INR 50.62 billion on the exchanges, while domestic institutional investors net bought shares worth INR 36.20 billion, as per provisional data.

The India VIX, an indicator of volatility in the market, fell 4.5% and closed at 13.97 Thursday. "With VIX levels staying below 15, the probability of bullish momentum increases, as lower volatility often attracts buying interest in the market," Dhupesh Dhameja, technical analyst at SAMCO Securities, said in a note. End

Edited by Akul Nishant Akhoury

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