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Informist, Friday, Nov. 1, 2024

By Anshul Choudhary

MUMBAI – Headline and broader market indices are likely to see relatively muted gains during Samvat 2081 as compared with strong returns in the past year. Analysts have curtailed their expectations from the new year as corporate earnings have disappointed for the second straight quarter, which has led to a cut in earnings estimates for the full year even before the September quarter earnings season ends.

Analysts and fund managers said consensus shows net profit of the Nifty 50 companies may rise 5-7% this financial year, significantly lower than expectations of 12-14% growth at the beginning of the year. This cut in estimates happened after the latest quarter's earnings showed weakness in consumer demand and an uptick in prices of several commodities which hit margins.

Above this, analysts said commentary from companies highlighted slower demand, which may even affect expectations of strong growth in the second half of this financial year. "There is some improvement in rural demand, but that is fairly gradual...it is not a V-shaped recovery. Some companies pointed to a slowdown in urban consumption, especially from the middle class," a fund manager at a top mutual fund house said.

Analysts said despite the recent correction, current valuations do not give them enough comfort against prospects of higher taxes from the US, uncertainty over the interest rate trajectory, and volatility in crude oil prices. There is added uncertainty due to presidential elections in the US, where a new president will bring new policies and that has raised the risk of higher taxes against India. "Red Sweep (Republican win in US) would probably trigger a short-term rally (in Indian equities) but its sustenance depends on earnings momentum and valuations, both of which are weak," Emkay Global Financial Services said in report Thursday.

For now, sentiments are weak and analysts expect markets to decline next week. According to some analysts, the Nifty 50 may even fall below 24000 points next week. There are some hopes that the Nifty 50 may see some relief as it has fallen over 6% in September--marking its worst fall since March 2020 when the government announced lockdown due to the COVID-19 pandemic. Even if the Nifty 50 rises from thereon, analysts expect strong resistance at 24500 points. After the one-hour muhurat trade Friday, the Nifty 50 ended at 24304.35 points, up 99 points or 0.4%.

Automobile stocks may rise more next week as wholeasale dispatches during October, announced by automakers Friday, were slightly above expectations. Among major automobile companies, shares of Mahindra and Mahindra rose over 3% during the muhurat session after the company reported a 20% on-year rise in total sales to 96,648 units in October. The company's passenger vehicle sales rose 25% on year, better than Nirmal Bang Insitutional Equities' prediction of a 21% rise.

Among other car-makers, Maruti Suzuki sold 159,591 passenger vehicles in India in October, lower than the same month last year, but it was above brokerage Nomura's expectations of 156,000 passenger vehicles sold. Among two-wheelers, Eicher Motors sold 110,574 motorcycles in October, up 31% on year. This was better than Nirmal Bang's expectations but slightly below Nomura's predictions.  End

Edited by Tanima Banerjee

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