MUMBAI – Indian equity markets slipped deeper into the red on Monday as benchmark Sensex shed more than 600 points and slipped below 71,400 points.
From the day’s high, the Nifty 50 plunged more than 230 points and slipped below 21,600 points. Weak trends in global markets and caution ahead of the quarterly earnings prompted investors to book profits.
Precisely, the Sensex and Nifty 50 dropped nearly 1% each and ended at 71355.22 and 21,513, respectively.
Selling pressure in the market saw volatility gauge India VIX surge nearly 7% and moved past 13 points. India VIX hit a high of 13.5075 points.
“The market witnessed widespread selling as the euphoria over early rate cuts may diminish due to the better-than-expected non-farm payroll data from the US and the consequent rise in the US 10-year yield,” said Vinod Nair, head of research at Geojit Financial Services.
Here are some of the major factors that weighed on sentiment and saw the bears taking over bulls on Dalal Street.
Diminishing Fed rate cut bets
The overall sentiment was hit globally after data in the US showed that non-farm payrolls increased higher than expected by 216,000 in December. While the US Fed has guided for three rate cuts in 2024, the strong jobs report diminished prospects of early cut in interest rates by the US Fed.
Global equities in red
Most equities in Asia finished lower on Monday as investors were cautious ahead of key economic data points this week, which included inflation and trade data in China.
Major equity indices in China and Hong ended with more than 1% cuts.
European markets, too, started on a weak note, and US index futures point to a negative start on Wall Street.
Investors jittery ahead of earnings season
The December quarter earnings announcements will kickstart this week with the top 4 Indian IT companies. Infoys and Tata Consultancy Services will announce their earnings on Thursday, while HCLTech and Wipro will release their numbers on Friday. Continued slowdown in IT spending, extended furloughs, and cost pressures are likely to weigh on the performance of the companies at large in the December quarter, according to analysts.
The Street will eagerly await management commentary on the outlook for tech spending in 2024 and subsequently earnings view.
Banks take a hit
Financials were among the worst hit in today’s trade. Macquarie Research said it expects banks’ earnings growth to slow down next fiscal due to moderating credit growth, declining margins and normalising credit costs. The brokerage downgraded Bank of Baroda and State Bank of India (SBI).
HDFC Bank, ICICI Bank, SBI and Axis Bank were among top Sensex drags, down between 1-2% while PSU bank index tumbled over 2%.
Sectoral Performance
A majority of the sectoral indices were in the red, with public sector stocks, banks, metals, and fast-moving consumer goods shedding the most. The S&P BSE PSU, Healthcare, Metal, Bankex, and FMCG indices lost 1-1.6%.
Of the 30 Sensex stocks, 24 were in the red, and this includes heavyweights Infosys, Reliance Industries, HDFC Bank, ICICI Bank, TCS, Hindustan Unilever, ITC, and SBI. These stocks lost 1-2%.
Broader Market
Stocks in the midcap and smallcap segments, too, succumbed to profit booking. The BSE Smallcap and Midcap indices fell 0.3% and 0.8%, respectively.
Shares of PVR Inox, Indus Towers, Jubilant FoodWorks, Marico, Bank of Baroda, SPARC, Hindustan Copper, and Bandhan Bank fell over 2-7%.
Outliers
While the overall market breadth was negative, there were several outliers. Adani Ports and SEZ was one among them. Shares of the company ended more than 1% higher and also scaled a lifetime high intraday.
Meanwhile, bull run in Alok Industries continued as the counter continued to be buoyed by fund infusion by promoter Reliance Industries. The stock was locked in the upper circuit of 10%.
Some of the other major outliers in the smallcap segment were Suzlon Energy, Gillette India, JBM Auto, Capri Global, and Trident, ending with 5-18% gains.
Expert Views
According to Vinod Nair, in the near term, investors’ trade positions will be more inclined towards the upcoming result season.
“While the outset may be tempered by lower expectations in the IT sector, the overall forecast for earnings growth remains optimistic, projecting double-digit figures,” Nair said.
In the short term, if Nifty 50 and Sensex trade below 21,650/71,800 levels, then the weak sentiment is likely to continue, and they can slip towards 21,450-21,400, and 71,000-70,900, respectively, said Shrikant Chouhan of Kotak Securities.
“Markets traded under pressure and lost nearly a percent, in continuation to the prevailing consolidation phase. After the flat start, Nifty drifted gradually lower and finally settled around the day’s low at 21,513 levels. The decline was widespread wherein FMCG, metal and banking were among the top losers. The broader indices also felt the heat and lost in the range of 0.6%-1.06%,” said Ajit Mishra, SVP, technical research, Religare Broking Ltd.
“Nifty has engulfed the gains of the last three sessions and may slip further towards the support zone of 21,200-21,300 levels.” he added.
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