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Informist, Friday, Oct. 25, 2024

By Alina Geogy

MUMBAI – Indian equities ended sharply lower Friday as investors were discouraged by a slowdown in corporate earnings and relentless selling by foreign institutional investors, market watchers said. Owing to strong selling pressure, the benchmark indices closed at a two-month low, extending losses to the fifth consecutive day, and down for the fourth week in a row. Nearly 80% of all stocks traded on the exchanges ended with losses Friday.

Losses in most heavyweight stocks took the Nifty 50 and Sensex down as much as 1.3% and 1.2%, respectively, during the day. However, gains in shares of fast-moving consumer goods firms and some private banks ensured that the benchamrks would not fall any lower. The indices then came off lows in the last one hour of trade, with the Nifty 50 closing 0.9% lower at 24180.80 points and the BSE Sensex closing 0.8% lower at 79402.29 points.

Investors turned to quarterly earnings as a slew of earnings were slated for the day. Shares of IndusInd Bank fell 20% after a decline in its net profit for Jul-Sept and bearish comments by several brokerage firms highlighting concerns over the bank's growth in the near term. Brokerage firms Nirmal Bang Institutional Equities and Nuvama Institutional Equities both downgraded the stock's rating to 'hold' from 'buy', and several others cut the target price and earnings estimates.

According to Kaitav Shah, research analyst at Anand Rathi Share & Stock Brokers, the sharp decline in shares of the bank was likely a knee-jerk reaction to the earnings, and a further fall could provide a good opportunity to buy the stock. The September quarter was challenging for the bank, but it is expected to improve over the next few quarters, he said. For 2025-26, "a healthy bounce-back" is expected in the bank's growth, net interest margin, and asset quality, ICICI Securities said.

The September quarter earnings of ITC was a welcome relief for investors, who were rather alarmed about the near-term growth prospects of fast-moving consumer goods companies after several sectoral giants, such as Hindustan Unilever, Colgate-Palmolive (India), and Nestle posted weaker-than-expected earnings. While ITC's net profit for the September quarter was slightly below estimates, the company reported steady growth for the September quarter, with revenue beating all estimates owing to robust growth in its cigarette, agricultural, and hotels businesses.

While all other sectors were hit by selling, defensive stocks, namely those of pharmaceuticals and fast-moving consumer goods firms, emerged as a safe space for investors. The Nifty FMCG, Nifty Pharma, and Nifty Healthcare indices were the only sectoral indices which ended with gains. There is uncertainty about how much the market may correct more, which is making these defensive bets appealing to investors who still want to put money into equities, analysts said.

A correction in the market was long overdue as it had reached an overbought condition, with the indices running up a lot in the last few months, analysts said. There was a trigger required for this correction to kick in, which has now been provided by the persistent selling by foreign institutional investors, V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, said. To add to this, the recent September quarter earnings suggest a slowdown in the financial growth of companies, which is aggravating the selling pressure in the market, he said.

Of the three Nifty 50 companies that reported earnings for the September quarter during market hours Friday, Bharat Electronics and JSW Steel missed analysts' estimates for the bottom line for the quarter, while Bharat Electronics' net profit rose more than the Street's estimates. Shriram Finance, which posted its earnings after market hours, also reported a slightly smaller-than-expected rise in its net profit for the September quarter. Shares of Bharat Electronics, which traded around 4% lower for most of the first half, turned positive after it reported strong growth in net profit for the September quarter. The stock ended up 0.4%.

The benchmark indices are now down nearly 8% from the all-time high hit on Sept. 27. While the decline began a month back, it deepened in the past few sessions. The Nifty 50 lost over 2% in just the last five sessions, while the Sensex lost nearly 3%.

The broader market had a sharper decline Friday, with the mid-cap indices falling to their lowest levels in three months. Most Nifty mid-and small-cap indices registered a fall for the second consecutive week. The Nifty mid- small-cap indices closed around 2% lower each.

"All outflows this week are from mid-cap funds", brokerage firm Elara Securities (India) said. Rather India dedicated mid-cap funds have seen consistent outflow for 16 weeks in a row starting July, while India large-cap fund flow is still not impacted much, the brokerage said.

Shares of Poonawalla Fincorp fell sharply and ended down 17.2% after the company reported a sharp rise in provisions in the September quarter to INR 9.10 billion from INR 281 million in the year-ago period. Hindustan Petroleum Corp. fell 8% after it reported a net profit of INR 6.31 billion for the September quarter, far below the Street's expectation of INR 18.13 billion.

Shares of Dixon Technologies (India) closed down 7% as the company's expectation of slower demand for mobile phones in Oct-Dec and lower margin expansion in Jul-Sept may have weighed on the stock, analysts said. Shares of Colgate-Palmolive (India) fell 4% after the company reported lower-than-expected net profit for Jul-Sept, with this growth being the lowest in six quarters.

Shares of Poonawalla Fincorp, Hindustan Petroleum Corp., and Dixon Technologies (India) were the worst hit in the Nifty 500 index, while shares of Thermax, Laurus Labs, and Jammu & Kashmir Bank were the top gainers. Of all stocks traded on the NSE, nearly 220 hit a 52-week low and over 300 hit a lower circuit Friday. 

* Of the Nifty 50 stocks, 11 rose and 39 fell

* Of the Sensex stocks, 9 rose and 21 fell

* On the NSE, 521 stocks rose, 2,303 fell, and 78 were unchanged

* On the BSE, 738 stocks rose, 3,215 fell, and 68 were unchanged

* Nifty Consumer Durables: down 2.6%; Nifty Oil & Gas: down 2.5%; Nifty FMCG: up 0.9%

BSE                                               NSE

Sensex: 79402.29, down 662.87 points or 0.83%      Nifty 50: 24180.80, down 218.60 points or 0.90%

End

Edited by Vidhi Verma

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