There is nothing festive about the festive season for stock investors, with Dalal Street joining the global market sell-off triggered by rising US bond yields and rising geopolitical tensions. Equity benchmarks Sensex and Nifty fell for the sixth consecutive session on October 26. Nifty, the blue-chip index, fell below 19,000, crossing the psychologically vital level for the first time since June 28. After hitting a lifetime high of 20,222 in September, Nifty on September 15 succumbed to selling pressure due to mixed second-quarter earnings. Also Read: Nifty dips below 18,900; Increase in US bond yields and inflation concerns come to the fore
Wipro became the biggest loser of the period after disappointing second quarter numbers. The Bengaluru-based IT services player’s revenue fell for the third consecutive quarter due to broad-based decline in key sectors including BFSI, communications and manufacturing.
Wipro recorded the weakest growth among its peers. With the company’s weak Q3 guidance in the range of -1.5 to -3.5 percent, analysts expect Wipro’s revenue growth in FY24 to be among the lowest among Tier 1 IT firms. “Wipro is stuck between an unambitious valuation and weak business traction,” said analysts at HSBC, while maintaining a “hold” rating on the stock with a lower target price of Rs 350 per share. Tech Mahindra comes second on the list after reporting a massive 61.6 per cent drop in net profit to Rs 494 billion on a year-on-year basis in the September quarter, signaling that the second quarter will be a dud due to slowdown in demand in the telecom and communications segment and delays in deal cycles. . Also read: Adani auditor EY faces accounting regulator probe In fact, the entire domestic IT sector is on the back foot as high interest rates and weak consumer sentiment in Western economies lead to a sustained slowdown in discretionary spending, leading to delays in decision-making further deal conversions . Adani Group’s flagship, Adani Enterprises, was also included in the list. still reeling from the effects of the Hindenburg report. So is Adani Ports.
Also Read: FIIs increase stakes in major IT companies in Q2 despite weak earnings outlook
HDFC Bank, which announced its first quarter results following its merger with parent group Housing Development Finance Corporation (HDFC), also continued to underperform. While the second quarter figures were not comparable to the pre-merger period, HDFC Bank’s management had presented pro forma figures for the first quarter to give an idea of what the merged entity would look like. According to Jefferies’ merger-adjusted analysis, HDFC Bank’s net profit fell by 2 percent sequentially against a reported increase of 33 percent. The biggest impact was on HDFC Bank’s net interest margin (NIM), which fell by 70 basis points sequentially to 3.4 per cent compared to the 4 per cent level it has traditionally maintained. A basis point is one hundredth of a percentage point.
Winner PSU In contrast, PSU stock was the best performer during Nifty’s 1,000-point decline. Coal India shares touched a 52-week high of Rs 319.55 on October 18, driven by positive analyst comments and continued buying interest. The coal producer offers triple benefits of volume growth, improved e-auction prices and a possible all-time high dividend in the second half of 2024, brokerage firm Nuvama Institutional Equities said in a report earlier this month. “Although the stock has rallied around 25 per cent since September 23, we expect further upside potential of 35 per cent in a year, excluding dividends of Rs 30 per cent in the second fiscal and Rs 25 per cent in FY20,” the brokerage said. As monsoon rainfall decreases and hydro/wind generation declines, Nuvama said thermal energy demand will increase further in the second half of 2024. The rise in global coal prices, combined with an increase in industrial activity, increased the e-auction premium from 54 percent in the first fiscal quarter to 106 percent in the second quarter. FMCG stable Nestle India, Hindustan Unilever and Britannia have burned the FMCG space’s reputation as a firewall in turbulent times. Many brokerage firms raised their target price and maintained their rating on Nestle India after the company posted an operating profit of more than 20 per cent for the third consecutive quarter. Automotive companies also performed well in a declining market, helped by strong demand and low commodity prices.
Sector-wise, IT, metals and media were the worst performers. Only one index managed to stay in the green: Nifty CPSE. In the broader markets, the majority of mid-cap and small-cap stocks have succumbed to profit booking following the recent big rally.
However, elite real estate, cement and financial box offices continued their superior performance.
The star player of this period was BSE. BSE shares have been on the rise since October 21, when the exchange revised trading fees in its equity derivatives segment with effect from November 1. These changes will primarily be used on S&P BSE Sensex Options, especially contracts with nearest or immediate expiry. According to AR Ramachandran of Tips2trades, with the rise in transaction costs, BSE’s margins are bound to improve in the coming quarters due to more traders joining the options trading bandwagon and hence the phenomenal rise in BSE stock prices. It is also driven by rising demand for the stock, strong growth in derivatives volumes and rising interest in mutual fund platform Star MF.
However, when we look at the overall picture, according to market experts, we are not out of the way yet. “There is a risk aversion in global equity markets triggered by a combination of economics and geopolitics. The Israel-Hamas conflict continues to be a major headwind for the markets,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. If the conflict continues, he said, it also has the potential to impact global growth as the global economy is already in the midst of a slowdown. “But the strongest headwind for the market in the near term is US bond yields, which remain stubbornly high. With 10-year bond yields at almost 5 per cent, FPIs are likely to be in sell mode. Sectors like banking and IT will account for the most of FPIs’ AUM.” “The stocks that constitute the largest segment are likely to be under pressure. This will provide opportunities for long-term investors, especially in the banking sector, to purchase quality shares at attractive rates.”