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Informist, Wednesday, Jan. 8, 2025

By Alina Geogy

MUMBAI – Indian equities could extend their fall to Thursday as investors remain cautious ahead of the corporate earnings season, which would begin with Tata Consultancy Services reporting its earnings post market hours. However, there are chances for some gains, particularly after the benchmark indices bounced back sharply from their support levels and recouped most losses Wednesday, analysts said. There could be volatility ahead due to the expiry of the weekly options contracts of the Nifty 50.

Concerns over how the December quarter earnings could pan out had dented investor sentiment Wednesday, analysts said. There are worries that several companies could report weaker-than-expected earnings for the quarter. These worries increased after some companies, last week and early this week, posted disappointing business updates for the quarter.

Wednesday, the Nifty 50 and Sensex fell nearly 1% earlier in the day because of selling pressure in banking stocks. However, the benchmark indices came sharply off lows in the second half of the session and closed slightly lower Wednesday. The Nifty 50 and Sensex closed 0.1% lower each at 23688.95 points and 78148.49 points, respectively.

The Nifty 50 bounced back sharply after it found support near 23500 points, Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. The index could continue to pull back as long as it remains above 23500 points, he said. It could bounce back to around 23800 points, he said.

Shares of information technology companies would remain in focus Thursday ahead of the quarterly earnings of TCS. Though the company's revenue for the December quarter is expected to remain impacted by furloughs, client-specific challenges are likely to normalise in the quarter, Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services, said in a note. Wednesday, shares of TCS closed 2% higher at INR 4,108.40. The stock was the second-top gainer in the Nifty IT index, which closed up 0.6%.

For the December quarter, the IT major is expected to post a sequential decline of 0.3% in consolidated revenue to INR 640.70 billion, according to the average of estimates from 11 brokerage firms. Its consolidated net profit is likely to rise 3.1% sequentially to INR 122.74 billion. The earnings before interest and tax margin may improve, driven by talent development, training, and operational efficiency, Khemka said.

Investors will also look forward to the minutes of the US Federal Open Market Committee's last meeting and its economic forecast. The minutes, due early Thursday, may provide additional insight into the stance of policymakers and their expectations from the economy. With the Fed now widely expected to keep key rates steady at its next meeting late January, the market will monitor every economic report for clues about the interest rate trajectory.

Amid the near-term bearishness in the market, some analysts recommend being specific with stock selections and taking a 'sell on rise' approach. Oversold positions in select heavyweight stocks limited the pace of decline despite the overall negative trend in the market Wednesday, Ajit Mishra, senior vice president of research, Religare Broking, said in a note. "We recommend maintaining a "sell on rise" strategy for the index," he said.

Investors will also be watchful of data about foreign investor activity in the domestic market, as net sales by foreign institutional investors have dented market sentiment. On Tuesday, foreign institutional investors had net sold shares worth nearly INR 15 billion on the exchanges.  End

Edited by Ashish Shirke

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