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Informist, Monday, Jan. 13, 2025

By Anshul Choudhary

MUMBAI – Benchmark indices lost around 1.5% each Monday and fell to their lowest levels in over seven months as a fresh US jobs report raised uncertainty over the interest rate trajectory and a sharp rise in Brent Crude futures hit sentiment across global markets. This exacerbated the problems for the Indian market, which is already struggling due to a slowdown in earnings growth and outflows by foreign investors.

The Nifty 50 closed at 23085.95 points and the Sensex closed at 76330.01 points, down 1.5% and 1.4%, respectively. The fall was even sharper in small-cap and mid-cap stocks with the Nifty Smallcap 250 and Nifty Midcap 150 falling 4% each. Losses were spread across the sectors with nearly 90% of the stocks traded on the NSE ending lower.

Major equity markets across the globe declined after the fresh jobs report raised fears that further cuts in interest rates could be months away. The non-farm payrolls data showed the US economy added 256,000 jobs in December, significantly higher than the expectations of 155,000 jobs, Dow Jones reported.

After this, analysts curtailed their expectations, and they now expect the next rate cut in the US to be possible only in June or thereafter, CME FedWatch Tool data showed. This pushed bond yields in the US higher with yields on the 10-year bonds touching 4.80% briefly. High bond yields in the US have been a major reason behind the recent outflows by foreign investors from Indian equities.

Apart from this, the sentiment were also hit after Brent Crude oil futures saw a sharp rise, crossing $81 per barrel, after the US imposed sanctions on Russia, targeting their revenues from oil. These sanctions are likely to affect oil supply from Russia to India and China, Reuters reported. At 1535 IST, Brent crude futures were up 1% at $80.58 per bbl. Since the announcement of sanctions on Friday, crude oil prices have risen nearly 5%.

Concern over interest rates and a jump in crude prices have made things worse for Indian investors as they are already facing losses due to a slowdown in earnings growth that has lasted for longer-than-expected. "The earnings (revenue) growth this quarter is likely to be similar to that in the second quarter (Jul-Sept)...further fall (in market) is possible considering global uncertainties," said Seshadri Sen, head of research at Emkay Global Financial Servces.

The slowdown in earnings is being seen as a major risk to market returns as valuations are not attractive to several analysts. This was largely visible in the sharp fall in mid-caps and small-caps that have been under selling pressure due to their high valuations compared with the large-caps. The broader market indices have lost 8-10% so far this month. 

"...the rich valuations of most parts of the market simply reflect the price-agnostic buying behaviour of non-institutional investors and 'forced' buying of domestic institutional investors for the past 2-3 years. The lack of fear and the focus on greed (of returns) among retail investors have pushed valuations to absurd levels in several cases," Kotak Institutional Equities said in a note.

Losses were spread across sectors with all the sectoral indices ending lower. Due to a sharp rise in crude oil, shares of oil marketing companies fell with those of Indian Oil Corp. and Hindustan Petroleum Corp. fell over 6% each, and those of Bharat Petroleum Corp. fell 4.5%. Shares of city gas distributor Adani Total Gas fell nearly 8%, and those of Mahanagar Gas fell 4.5%.

Real Estate companies were the worst hit with the Nifty Realty index falling 6.5%. Among others, sectoral indices of consumer durables, metal, and energy fell 3-4%. Some of the worst hit large-cap stocks included Adani Enterprises, Trent, BPCL, Bharat Electronics, and Power Grid Corp of India, which fell 4-6%. Index-heavyweights also declined with shares of Larsen & Toubro, HDFC Bank, and ICICI Bank down 1.5-2.0%.

With the earnings season in focus, there were several stock-specific reactions. Shares of Just Dial fell nearly 13% to INR 899.30 after its net profit during the December quarter declined nearly 15% on quarter. ICICI Securities downgraded the stock to 'hold' from 'buy' after traffic on Just Dial's platforms declined. "..the key question on the stock regarding cash distribution to shareholders remains unanswered. Also, JD (Just Dial) has not hosted a conference-call over the last two quarters, which further reduces visibility on growth outlook and remedial measures taken by management to revive growth," the brokerage said. It has a target price of INR 1,028.

Shares of PCBL Chemical fell nearly 10% to INR 351.85 after its net profit and revenue declined on year. Analysts were disappointed by earnings due to lower-than-expected sales of carbon black and pressure on margins of its aquapharm business due to competition from China, and lower demand in the US. Post earnings, Nuvama Institutional Equities downgraded the stock to 'hold' with a target price of INR 397.

Among others, shares of PB Fintech fell nearly 9% after Morgan Stanley downgraded the company to 'underweight' from 'equal-weight'. Shares of Adani Wilmar continued to fall after promoter Adani Commodities announced plans for an offer for sale with floor price set at INR 275. The stock ended at its 10% lower circuit of INR 351.85 and has fallen nearly 20% since the announcement of the offer for sales.

Shares of Standard Glass Lining Technology listed Monday at INR 172, a premium of nearly 23% compared with the company's initial public offering price of INR 140. Later in the session, the stock came off highs slightly to close at INR 163.28, still up nearly 17% from the issue price.

* Of the Nifty 50 stocks, 4 rose and 46 fell

* Of the Sensex stocks, 4 rose and 26 fell

* On the NSE, 326 stocks rose, 2,525 fell, and 84 were unchanged

* On the BSE, 555 stocks rose, 3,562 fell, and 131 were unchanged

* Nifty Realty: down 6.5%; Nifty Media: down 4.5%; Nifty Metal: down 3.8%

BSE                                               NSE

Sensex: 76330.01, down 1048.90 points or 1.4%     Nifty 50: 23085.95, down 345.55 points or 1.5%

End

Edited by Akul Nishant Akhoury

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