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Informist, Wednesday, Jan. 8, 2025

By Anshul Choudhary

MUMBAI – Benchmark indices ended slightly down amid concern that the December quarter earnings may come below expectations due to weak demand, lower-than-expected capital expenditure, and higher input costs for some companies. Further, the sentiment was also affected due to weakness in global markets after the strong jobs data in the US hurt the prospects of sharper cuts in interest rates.

The Nifty 50 closed at 23688.95 points. Earlier in the session, the Nifty 50 was down much as 1%, falling close to its key support level of 23500 points before it recovered in the final two hours. While large-caps made some recovery, broader market indices remained down with the Nifty Smallcap 250 falling 1.4% and the Midcap 150 1.1%.

Several brokerages' earnings estimates show the quarter is likely to disappoint on the earnings front, while the recent GDP growth estimate raised worries that the slowdown in earnings may last for some more time. India's GDP is likely to grow 6.4% in 2024-25 (Apr-Mar), according to the government's first advance estimates on Tuesday. This is slightly higher than the 6% growth seen in the first half of this financial year, but lower than the 8.4% growth in FY24.

The GDP estimate shows there has not been any significant pick-up in investments by the government as well as private companies, analysts said. This is disappointing as the market had hoped for higher capex starting October, which was expected to be visible in Oct-Dec earnings. However, Motilal Oswal Financial Services said earnings of the Nifty 50 companies in Oct-Dec are likely to rise by only 6%, similar to the first half of this financial year.

"This (slower investments) is likely to have an impact on corporate earnings, not just this quarter (Oct-Dec), but some quarters after that as well," said Dhananjay Sinha, head of research at Systematix Group. "Margins (of corporates) have peaked and there is a risk that these may contract going forward."

Due to concern around earnings, markets have failed to recover from the slump seen in the previous three months. The Nifty 50 is still down nearly 10% from its lifetime high touched in September last year. This fall was largely driven by record outflows by foreign investors, who are unlikely to buy Indian equities till earnings growth improves or bond yields in the US come down, analysts said.

The yield on 10-year bonds in the US has now touched 4.7% after jobs openings in the country came in higher than expected, raising fears of slower cuts in interest rates this year. High yields in the US led to weakness in global equity markets, which likely had a negative effect on Indian markets as well. Equity indices in the US, China, Hong Kong, and Japan also fell.

Most of the sectors were weak with losses spread across banks, pharmaceutical, healthcare, cement, and automobile companies. Some index-heavyweights such as HDFC Bank and ICICI Bank fell over 1%, while the negative impact of these was somewhat offset by a near 2% gain in shares of Reliance Industries.

Among major losers, shares of Apollo Hospital fell over 4% and lost all the gains accumulated over a month. Shares of Trent were down for the fourth straight session, losing nearly 9% during this period. Cement stocks also fell with UltraTech Cement down nearly 2%.

There were several stock-specific reactions. Shares of One97 Communications, the parent company of payments aggregator Paytm, fell over 8% after data from the National Payments Corp. of India showed the company's Unified Payment Interface's market share failed to rise in December. Shares of Dixon Technologies fell over 8% to close at the lowest level in over a month at INR 16,905.85.

Shares of United Breweries fell 3.6% after the company said it has suspended the supply of its beer to Telangana Beverages Corp. Ltd. with immediate effect due to unpaid dues and as prices have not changed since 2019-20. In its earnings conference call for Apr-Jun, United Breweries said the amount outstanding from the Telangana government was INR 9 billion.

Within the gainers, shares of Oil and Natural Gas Corp. extended gains from Tuesday and rose 3%. Shares of Dr Reddy's Laboratories rose nearly 1% after Nuvama Institutional Equities upgraded the stock to 'buy' from 'reduce' and raised the target price by 28% to INR 1,553. The stock ended at INR 1,370.75.

Shares of The Phoenix Mills rose sharply in final hours of trading and closed 7.6% higher. The National Stock Exchange said Tuesday it will introduce futures and options contracts of the stock from Jan. 31.

* Of the Nifty 50 stocks, 23 rose and 27 fell

* Of the Sensex stocks, 14 rose and 16 fell

* On the NSE, 952 stocks rose, 1,865 fell, and 97 were unchanged

* On the BSE, 1,386 stocks rose, 2,586 fell, and 94 were unchanged

* Nifty PSU Bank: down 4%; Nifty Energy: down 3%; Nifty Realty: down 3%

BSE                                               NSE

Sensex: 78148.49, down 50.62 points or 0.1%       Nifty 50: 23688.95, down 18.95 points or 0.1%

End

Edited by Akul Nishant Akhoury

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