NEW DELHI: Disappointment over quarterly earnings and unfavourable global cues weighed heavily on investor sentiment as listed stocks eroded over Rs 3.83 lakh crore in value in Monday’s selloff.
Within 60 minutes into trading, market capitalisation of all stocks listed on BSE had fallen to Rs 268.19 lakh crore from Rs 272.03 lakh crore last Wednesday, as the market resumed trading today after a long holiday. Interestingly, midcaps and smallcaps fared relatively better, restricting their losses to up to 1.5 per cent against up to 2 per cent drop in the BSE Sensex and Nifty50.
Here’s what dragged the key indices lower:
Infy, HDFC Bank disappoint
The quarterly results of HDFC Bank and Infosys last week fell short of market expectations, hurting investor confidence further. The two stocks alone contributed over 500 points in Sensex fall. These stocks accounted for 17.56 per cent of Nifty50 weight as of March 31.
Infosys was down 5.7 per cent to Rs 1,649. It also dragged shares of other IT companies such as Tech Mahindra (down 4 per cent), HCL Tech (down 2.3 per cent) and Wipro (down 2.2 per cent), which will soon disclose their quarterly earnings. IT stocks account for substantial weight in Sensex.
On Infosys, CLSA said: “While demand tailwinds should bring the revenue growth back on track soon, margin recovery may take time given persistent supply-side pressures. The consequent reset in estimates – we cut our FY23EPS forecasts by 5 per cent and FY24 by 4 per cent – could dampen investor sentiment in the near term. However, the stock’s 8 per cent YTD underperformance limits the downside, in our view.”
Another disappointment came from HDFC Bank that fell 3 per cent to Rs 1,420. A host of brokerages have trimmed their price targets on the stock as they felt March quarter earnings growth at 23 per cent YoY was mainly driven by lower provisions. “We believe two consecutive let-downs on core pre-provision operating profit coupled with merger uncertainty could weigh on the stock. On balance, at September 2023 P/BV of 3 times, retain ‘BUY’ with a target price of Rs 1,860,” Edelweiss said.
China GDP growth soft, Covid cases rise
China GDP numbers did not go down well with Asian markets, which fell up to 2 per cent in Monday’s trade. China’s GDP growth came in at 4.8 per cent year-on-year and that the risk of a sharp slowdown over coming months has risen due to curbs across Shanghai and the Ukraine war. The March quarter growth was well below the official target of 5.5 per cent for 2022.
Besides, as per reports, China’s economic hub Shanghai reported 2,417 confirmed locally transmitted Covid cases and 19,831 local asymptomatic carriers, the municipal health commission said on Monday. On Sunday, three deaths were reported due to Covid.
Monday was already not an active day, with markets across Hong Kong and Australia and most parts of Europe remaining shut on account of the Easter holiday.
Technical charts weak
Nifty50 had last week formed an Evening Doji Star-like candle, which signalled more pain ahead. The level of 17,450 was expected to act as an immediate support level but the index breached that level easily.
“A decisive fall below 17,450 levels can lead to a retest of 16,900 level. Thus, traders should maintain a mild bearish outlook going into the next week. A move above the immediate resistance level of 17,850 can negate the bearish outlook,” Yesha Shah of Samco Securities had said in a weekly note.
Negative cues from Wall Street
Last Thursday, Wall Street stocks finished lower while bond yields and the dollar rose as investors worried about the potential for aggressive US policy tightening as other central banks around the world moved to reduce support, Reuters reported.
The S&P 500 fell 1.2 per cent, ending a shortened trading week with a 2.1 per cent decline. The Dow Jones Industrial Average fell 0.3 per cent and the Nasdaq composite lost 2.1 per cent. Investors again turned their attention to the drama surrounding Tesla founder and CEO Elon Musk and Twitter. Musk offered to buy the social media company for $54.20 a share, two weeks after revealing he would accumulate a 9 per cent stake, agencies reported.
Intensifying Russia-Ukraine war
There was no signs that Russia-Ukraine war may ease anytime soon. Braced for an all-out Russian assault in the east, Ukraine vowed to “fight absolutely to the end” in strategically vital Mariupol, PTI reported.
With missiles and rockets also battering other parts of the country, Ukrainian President Volodymyr Zelenskyy accused Russian soldiers of carrying out torture and kidnappings in areas they control.
The fall of Mariupol, which has been reduced to rubble in a seven-week siege, would give Moscow its biggest victory of the war, PTI reported.
