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Informist, Thursday, Nov. 21, 2024

By Anjana Therese Antony

MUMBAI – On Friday, another day of decline is likely for the Indian stock market, which has been falling since October on unfavourable factors, including massive foreign outflows, earnings downgrades, expensive valuations, rupee depreciation, and geopolitical tensions in West Asia. "I do not see a recover rally anytime soon. Our fundamentals are weak and we could see about 7-10% fall in the weeks to come so that valuations become reasonable," a research analyst at a domestic bank-sponsored broking firm said. While a periodic bounceback is expected, it is highly likely that investors will make fewer returns on their investment, the analyst said. 

On Thursday, the Nifty 50 closed 0.7% lower at 23349.90 points and the BSE Sensex ended 0.5% lower at 77155.79 points, erasing all the gains made Tuesday. Both benchmark indices hit five-month lows during the day. Near-term support for the 50-stock index is pegged at 23100-23000 points and resistance at 23500-23600 points. The index fell below its 200-day moving average of 23500 points and if it continues to fall in the near term, there is a chance for a brief upside, a technical and derivatives analyst at domestic broking firm said. 

Depreciation in the domestic currency has also been a worrying factor for investors. Recurring foreign outflows and renewed strength of the dollar, particularly due to the lower possibility of a further rate cut in the US, have been weighing on the currency. FIIs net offloaded shares worth nearly $13 billion during Oct. 1-Nov. 18. Recently, US Federal Reserve Chairperson Jerome Powell said the apex bank is not in a hurry to reduce rates, which came as a negative surprise to market participants who were anticipating a 25-basis-point cut in December. The Fed had reduced key interest rates by 25 bps in November and by a surprising 50 bps in September. 

Investors, who burnt their fingers due to the massive fall in Adani group stocks, will continue to watch out for further updates related to bribery allegations against Chairman Gautam Adani and other senior officials. The US Justice Department issued an arrest warrant against Gautam Adani and his nephew Sagar Adani over an alleged multi-billion-dollar bribery and fraud scheme involving his solar projects in India. This raised concerns about the continuity of various projects under the group's companies and also about their ability to liquidate or raise funds, analysts said.

The group of companies together lost over INR 2 trillion in market capitalisation Thursday. Shares of the two large-cap companies, Adani Enterprises and Adani Ports and Special Economic Zone, closed lower by a whopping 22.6% and 13.6%, respectively. These stocks together contributed to nearly 0.3% fall in the Nifty 50 index.

However, the conglomerate denied these allegations and called them "baseless". Reports, attributing legal sources, said the US Court and the Securities and Exchange Commission could summon more witnesses from India and the US regarding the bribery case. Moody's Ratings said the case could be credit negative for the conglomerate and that it focusses on the companies' governance practices and their ability to access capital to meet their liquidity requirements. 

Banks and financial services companies, which have major exposure to Adani group companies, are also likely to be monitored by investors. Banks with exposure to the conglomerate include State Bank of India, Axis Bank, Bank of Baroda, and Punjab National Bank, an analyst at a broking firm said on the condition of anonymity. Among finance companies exposed to the Adani group are REC and Power Finance Corp., the analyst added. 

The Supreme Court's ruling in favour of telecom companies is expected to bode well for the sector in the near term. "We expect positive for telecom companies as the Supreme Court ruled in their favour, granting them the right to claim tax credits on duties paid for infrastructure components like tower parts and green shelters," Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services, said in a post-market note. 

In India, investors await the HSBC Flash India Purchasing Managers' Index for November, due Friday at 1030 IST. On the global front, investors will closely monitor various economic data, including Japan's October CPI data, UK November flash PMI, US November flash manufacturing PMI, and US November flash services PMI.  End

US$1 = INR 84.49

Edited by Avishek Dutta

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