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Informist, Monday, Nov. 11, 2024

By Alina Geogy

MUMBAI – The benchmark indices may fall slightly Tuesday owing to worries about weaker-than-expected quarterly earnings by most companies so far this earnings season and continued selling by foreign portfolio investors in the domestic market, analysts said. With the US presidential election concluded, investors eagerly await fresh triggers from global markets, besides clues about likely policy changes in the world's largest economy which could affect India Inc., they said. Investors will react to the September quarter earnings of Britannia Industries, Hindalco Industries, and Oil and Natural Gas Corp. released late Monday.

The Nifty 50 is now expected to remain within a range of 24000-24300 points, and there could be a move of about 500 points if it breaks out of this range on either side, Saral Seth, vice-president of institutional equities at Indsec Securities, said. The support for the Nifty 50 is seen at 24000 points while resistance is seen at 24500 points, according to technical analysts. On Monday, the Nifty 50 closed at 24141.30 points, down 6.90 points, and the BSE Sensex closed at 79496.15 points, up 9.83 points.

Investor sentiment is likely to be dampened over the coming days as foreign portfolio investors, who sold a record $10 billion worth of shares in October, continue to sell this month as well, analysts said. This month, they net sold $2.34 billion of shares till Friday. The only respite for the market is the support being offered by domestic institutional investors, who have been buying into the equity market.

Improvement in demand and a pick-up in order inflows due to an increase in capital expenditure from the government hint at better earnings in upcoming quarters, Abhilasha Satale, associate fund manager, equity, at Quantum Asset Management Co., said. The government's capital expenditure has been slow for the first half of the financial year 2024-25 (Apr-Mar), with around INR 3.6 trillion spent out of its total outlay of 11.11 trillion for the year, she said. The government will now need to spend around INR 1 trillion every month, which could translate to more orders in the second half of the financial year, she said.

Meanwhile, the earnings for the September quarter have been quite disappointing, with more earnings downgrades than upgrades, she said. For FY26, corporate earnings are now expected to be in high single digits to low double digits, she said, compared to the earlier estimate of strong double-digit growth.

The consolidated net profit of Britannia Industries is expected to get a boost from an increase in sales volume and expansion of its market share. The stock closed over 5% lower Monday ahead of its Jul-Sept earnings. Hindalco Industries is expected to report an on-year rise in its consolidated net profit on account of higher prices of aluminium and alumina in the September quarter. Meanwhile, ONGC's net profit for Jul-Sept is expected to decline due to lower on-year oil realisation and flat gas realisation. BOSCH, Zydus Lifesciences, and BSE are among those expected to announce their Jul-Sept earnings Tuesday.

Information technology stocks, which were among the major gainers Monday, are expected to rise some more in the next session. There are some green shoots in the IT sector, with a revival in the banking, financial services, and insurance vertical, and signs of a pick-up in discretionary spending in some pockets, Satale of Quantum Asset Management Co. said. However, valuations of mid-cap IT stocks are "stretched", while those of large-caps are comparatively better valued, she said. The worst is definitely over for the sector, particularly due to better growth prospects after the US elections, she said.

After other major central banks cut key interest rates last week, there were expectations that the Reserve Bank of India could follow suit. However, high food inflation is keeping these rate-cut hopes in check, analysts said. The CPI inflation data for October is due Tuesday. The headline inflation rate is expected to have risen to a 14-month high of 5.9% in October, led by a surge in food prices, according to an Informist poll of 20 economists. Investors now eye the US CPI for October, due Wednesday, and speeches from US Federal Reserve officials for clues to the apex bank's interest rate path.

Shares of NMDC and Jubilant FoodWorks could fall after the net profit reported by both companies for Jul-Sept, after market hours Monday, fell short of analysts' estimates. NMDC also approved a 2-for-1 bonus issue of shares.  End

Edited by Rajeev Pai

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