Weekly Wrap: Nifty Resumes Decline As Mixed Start To Earnings Fail To Lift Sentiment
Indian equity benchmarks resumed their decline after a breather in the previous week as earnings reported by Indian companies failed to lift investor sentiment.
The S&P BSE Sensex declined 1.2 percent to 34,316 and the NSE Nifty 50 Index dropped 1.6 percent to 10,304.
“Earnings are in line with estimates, but expensive valuations aren’t justifying the multiples,” AK Prabhakar, head of research at IDBI Capital, told BloombergQuint over the phone.
Currently, we’re going through a bear phase wherein a small miss by companies, as in the case of Reliance Industries Ltd. and Mindtree Ltd., are badly punished. Risk-off trading is on as investors are taking money out of markets and the Nifty is headed towards 9,900 by Diwali, Prabhakar said.
Six of eight Nifty companies that have reported earnings so far have either met or beaten estimates in July-September quarter, according to data compiled by BloombergQuint.
Indiabulls Housing Finance Ltd. was the top Nifty loser, plunging 30 percent—its worst weekly performance since listing—to Rs 654 as investors worried about its exposure to SuperTech Ltd., a property developer whose credit facilities have been downgraded to default.
Macquarie’s sales team, in a note to clients on Wednesday, said Indiabulls Housing Finance’s loans to SuperTech could be over Rs 500 crore. The lending, the brokerage said citing its discussions with the management, was for a specific project that is ringfenced and earns monthly rentals of close to Rs 30-35 crore.
Nine of 11 sector gauges compiled by the National Stock Exchange ended lower dragged by the Nifty Auto Index's 4.3 percent drop. On the flipside, Nifty FMCG Index was the top gainer, up 2.5 percent.
The Indian rupee appreciated for the second week in a row and was the third-best performing Asian currency after consumer price inflation rose marginally in September, but remained below the four percent mark. The central bank’s announcement of a plan to buyback bonds to support the market also helped in boosting investor sentiment.
The local unit rose 0.3 percent, or 25 paise, to 73.32 per dollar.
Big Talking Points This Week
- Tycoon Piramal weighs $1 billion contract pharma sale.
- Rakesh Jhunjhunwala tweaks positions in DHFL, SpiceJet and Lupin.
- How India’s largest hedge fund Avendus Capital deals with volatility.
- Arcelor to clear $1 billion in dues as Essar deadline looms.
- Halftime report: What the Indian economy will look like over the next six months.
- What India’s top three mutual funds bought and sold in September.
- India’s trade gap narrows to five-month low as import growth slows.
- U.S. firms seek another 12 months to meet data localisation rules.