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Informist, Tuesday, Oct. 29, 2024

By Alina Geogy

MUMBAI – Gains in banking stocks helped benchmark indices recover from intraday losses and end higher for a second consecutive day. Robust quarterly earnings from some major banks and relatively cheaper valuations led to buying in these stocks, according to analysts. Their gains offset fall in shares of carmakers.

The benchmark indices were lower for most of the day after opening flat. The weakness in the indices was because of a fall in automobile stocks, which fell further after market leader Maruti Suzuki India reported lower than expected earnings. However, with most banking stocks extending gains gradually, the indices came off lows and then turned positive in the last one-and-a-half hour of trade. During the day, the Nifty 50 fell as much as 0.8%, or nearly 200 points, but later rose 0.6%, or 145 points, and ended up 0.5% or 127.70 points at 24466.85 points. The BSE Sensex moved the same way and ended at 80369.03, up 0.5% or around 364 points.

Shares of ICICI Bank, State Bank of India, and HDFC Bank were the top contributors to the rise of the indices. Barring IndusInd Bank, shares of all other banks in the Nifty Bank index ended with gains. Shares of ICICI Bank ended up over 3%, rising for the fourth consecutive day, and those of SBI ended higher by over 5%.

Tuesday, Canara Bank joined the likes of ICICI Bank, HDFC Bank, and Bank of Baroda in reporting a higher-than-expected net profit for the September quarter. Federal Bank had also posted better-than-expected net profit for the quarter after market hours Monday. Analysts believe the fundamentals for the sector are positive and the prospects are good as there is no immediate rate cut in sight. Valuations of bank stocks have been low and that has also attracted investors. Investors, who were rather disappointed with muted earnings of companies from other sectors, are now welcoming healthy earnings from banks.

Several banks have reported strong earnings for the quarter, supported by a fall in provisions, stable margins, and fall in slippage ratios, Akhilesh Desai, research analyst at Ajcon Global Services, said. Now more earnings from this sector, such as State Bank of India are coming up, and that may help gauge whether these gains in banking stocks will sustain. SBI is also expected to post an on-year rise in key metrics for the quarter.

The automobile sector was the worst hit Tuesday, with the Nifty Auto falling the most among sectoral indices. This index fell to a four-month low and ended down nearly 2%, with 10 out of 15 constituents in the red. Shares of Bajaj Auto, Tata Motors, and Mahindra & Mahindra ended down but off lows after falling as much as 3-6% during the day.

Maruti Suzuki said its net profit for the September quarter fell 17% on year to INR 30.69 billion. The automaker missed analysts' estimates of a slight on-year rise to INR 38.09 billion by a very wide margin. The stock fell more than 6% to an over-eight-month low. The stock came off lows after the management said it expects retail sales to grow 14% on year from the end of the Shraddh period to Diwali. Shares of Maruti Suzuki and Tata Motors ended down around 4% each.

The decline in these stocks comes ahead of the monthly automobile sales data due later in the week. The wholesale sales data for October is likely to be a mixed bag, with growth in the tractor and two-wheeler segments, but flat numbers for the passenger vehicles segment, and a decline in sales in the commercial vehicles segment, Nuvama Institutional Equities said. Within the two-wheeler segment, all original equipment manufacturers are expected to do well, and Eicher Motors' Royal Enfield is expected to post robust growth, the brokerage said. Among passenger vehicle makers, M&M and Tata Motors will likely report growth in sales while Maruti Suzuki will log a decrease, the brokerage said.

Pharmaceutical stocks were also among the worst hit, with Sun Pharmaceutical Industries, Cipla, and Dr Reddy's Laboratories among the worst performers in the Nifty 50. The Nifty Pharma index snapped three days of rises. Around an hour before the market closed, Cipla reported a 15% on-year rise in consolidated net profit for the September quarter, its lowest growth in the last six quarters. The company's earnings were largely in line with estimates. Shares of Cipla ended down 1.7%, slightly off its low after the earnings were announced.

Among other stocks, Bharat Electronics closed higher by 5% after some brokerage firms released positive research for the company owing to its robust Jul-Sept earnings, better-than-expected margin performance, a strong order inflow pipeline, and plans to ramp up exports.

The broader market indices ended higher after brief losses during the day. These indices outperformed the benchmark ones. Some Nifty small- and mid-cap indices ended almost 1% higher, extending gains for the second day in a row. In the Nifty 500, shares of Syrma SGS Technology, Gillette India, and JSW Infrastructure were the top gainers, while those of Firstsource Solutions, Indegene, and Sapphire Foods India were the worst hit.

Shares of Syrma SGS Technology closed 15% higher, extending gains for the second straight session after the electronic manufacturing company said its consolidated net profit for the September quarter rose nearly 28% on year. Shares of Gillette India and JSW Infrastructure ended up around 10% after both companies reported better-than-expected earnings for the September quarter.

Shares of Firstsource Solutions closed down 8% after the company's consolidated net profit for the September quarter did not rise as much as analysts expected. Shares of Sapphire Foods India closed down 5% as the company posted a consolidated net loss for the September quarter against a profit a year ago. On the NSE, over 60% of all stocks traded during the day ended with gains and nearly 120 hit the upper circuit.

* Of the Nifty 50 stocks, 31 rose, 18 fell, and 1 was unchanged

* Of the Sensex stocks, 16 rose and 14 fell

* On the NSE, 1,730 stocks rose, 1,064 fell, and 70 were unchanged

* On the BSE, 2,242 stocks rose, 1,623 fell, and 126 were unchanged

* Nifty PSU Bank: up 3.6%; Nifty Financial Services: up 2.1%; Nifty Auto: down 1.6%

BSE                                               NSE

Sensex: 80369.03, up 363.99 points or 0.45%       Nifty 50: 24466.85, up 127.70 points or 0.52%

End

Edited by Ashish Shirke

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