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Informist, Friday, Oct. 25, 2024

By Anjali Singh

MUMBAI – Benchmark indices will likely remain under selling pressure next week, analysts said. Continued selling by foreign portfolio investors, which offloaded domestic shares worth nearly INR 860 billion in October so far, has dented market sentiment. Further, weak corporate earnings reported so far in the September quarter and disappointing management guidance also keep investors cautious, they said.

The market was overbought before the indices started to correct in October, Ruchit Jain, lead research analyst at 5paisa, said. The fall is due to strong selling by the FIIs and the market will likely correct more, Jain said. The support for the Nifty 50 is pegged at 23800–23900 points and then at 23400 points, Jain said. Jain expects the Nifty 50 to reach these levels in one to two weeks. Some analysts, however, believe that the market is oversold and may soon bounce back.

On Friday, the Nifty 50 closed 0.9% lower at 24180.80 points and the BSE Sensex closed 0.8% lower at 79402.29 points. The mid-cap and small-cap indices have fallen 5-7% this week, underperforming the benchmark indices. These indices may fall 5-6% more from the current levels, Jain said.

The fast-moving consumer goods sector is likely to extend losses next week as corporate earnings so far show a slowdown in urban consumption. These stocks had rallied this year on hopes of recovery in rural demand. In addition to the weak urban consumption, rural demand in the September quarter was also below expectations. The muted urban consumption will lead to weak margins, analysts said. The Nifty FMCG took a breather from sharp losses in the past few sessions on Friday and closed 0.9% higher.

There are concerns about urban consumption slowing down, as per the guidance of FMCG companies. The festive season was expected to be positive for consumption-related companies, but it is off to a tepid start. All eyes are now on the automobile sales data, due next week, as it will capture the demand trends in the Diwali week. The automobile sales data will also provide hints on urban consumption and the overall demand, Saral Seth, vice-president of institutional equities at IndSec Securities and Finance, said.

While the earnings of most companies have disappointed the market, quarterly earnings by mid-cap information technology companies have stood out. The earnings of these companies have been robust and the management's commentary has been healthy, analysts said. This has created hope amongst investors that other mid-cap IT companies will also report strong numbers. Further, IT stocks will find some support from potential interest rate cuts in the US. The US Federal Reserve's next monetary policy meeting is hardly two weeks away.   

ICICI Bank, Bharti Airtel, and Sun Pharmaceutical Industries will be in the spotlight Monday as they declare their September quarter earnings. ICICI Bank will report earnings on Saturday and the rest on Monday. ICICI Bank is expected to report strong growth in net profit in Jul-Sept on the back of higher loan growth, though there might be pressures from moderation in net interest margins and a rise in provisions.

Bharti Airtel is expected to report robust earnings for the September quarter, boosted by the tariff hikes and fourth-generation network subscriber additions. The company is also seen improving its industry-leading average revenue per user. Sun Pharmaceutical Industries is also seen reporting robust earnings for the September quarter, on the back of a ramp-up in sales of speciality drugs in the US and strong revenue growth in the domestic business.

Shares of Shriram Finance will be in focus after it reported earnings for the September quarter late Friday. Its net profit for the September quarter rose 18.3% on year to INR 20.71 billion, owing to a steady rise in interest income and assets under management.  End

Edited by Saji George Titus

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