The benchmark indices closed in the red on April 18, first day of trading in the new week. The markets opened after a long holiday--stock markets were closed on Thursday for 'Mahavir Jayanti' and 'Dr Babasaheb Ambedkar Jayanti', as well as on Friday on account of 'Good Friday'. The markets are closed on the weekends.
Sensex and Nifty slumped by around 2 percent on Monday making investors poorer by around Rs 4 lakh crore as IT and banking stocks crashed after the sectoral heavyweights, Infosys and HDFC Bank, announced disappointing financial results. IT index was down 4.7 percent and realty and bank indices down 1 percent each.
The BSE midcap and smallcap indices down 1 percent each. The market volatility index India VIX inched up by 9 percent during the day.
On the sectoral front, Nifty IT dragged more than 4 percent followed by PSUBANK, MEDIA and REALTY index while Nifty METAL, AUTO & ENEGRY closed at green note.
At close, the Sensex was down 1,172.19 points or 2.01 percent at 57,166.74. This is the fourth consecutive day of slump in the key indices. The Sensex had lost 237.44 points or 0.41 per cent on Wednesday, the last trading day. The Nifty was down 302 points or 1.73 percent at 17,173.70. About 1,454 shares have advanced, 1,990 shares declined, and 135 shares are unchanged.
HDFC Bank dipped 4.74 per cent to Rs 1395.35. HDFC tanked 4.81 percent to Rs 2263.05. State Bank of India dipped 1.57 percent to Rs 509.40.
The index heavyweight Reliance Industries fell 0.33 per cent to Rs 2544.15
Heavy selling pressure in IT stocks
There was heavy selling pressure in IT stocks. Infosys crashed 7.27 percent to Rs 1621.45. This is the steepest single day fall in Infosys share price in two years. Tech Mahindra slumped 4.69 percent to Rs 1,344.25. Wipro tanked 3.67 percent to Rs 538.75. TCS slumped 3.63 percent to Rs 3528.45. HCL Technologies slumped 1.99 per cent to Rs 1102.75.
Only 10 out of 30 stocks in Sensex closed positive
Only 10 of the 30 stocks that are part of the Sensex closed in the positive. NTPC surged 6.11 percent to Rs 163.30. Tata Steel jumped 1.51 percent to Rs 1339.20. Maruti Suzuki soared 1.37 percent to Rs 7574.55. Titan, Hindustan Unilever, Mahindra & Mahindra, Power Grid Corporation and Nestle India were among the major Sensex gainers.
Among top laggards on the Nifty were Infosys, HDFC, HDFC Bank, Tech Mahindra and Apollo Hospitals. NTPC, SBI Life Insurance, HDFC Life, Coal India and Tata Steel were the top gainers.
Nifty IT underperfoming due to supply-side pressures
Santosh Meena, Head of Research, Swastika Investmart Ltd. said, the Nifty IT is underperforming Nifty 50 due to supply-side pressures, the possibility of reduction in demand due to macro headwinds in the western nations, and overstretched valuations. Indian IT sector is trading at 28x 1-year forward P/E vs. past 10-year P/E of 18x, thus leaving a little room for potential upside in the short to medium term. Both TCS and Infosys results had a common theme, attrition remains at an all-time high, competitive intensity is increasing and companies are losing their pricing power, wage hikes, a gradual return to the office, and an increase in discretionary spending will put pressure on EBIT margins, however, the deal pipeline remains robust.
There is a consensus among IT companies that the clients are willing to spend for digitization regardless of their financial conditions and industry position. But this phenomenon might change due to inflationary headwinds and weak global economic cues, which will affect the client’s ability to pay, thus reducing their discretionary spending towards digitization, said Meena.
Another point to note is that the global interest rates are rising, therefore money is moving from growth stocks to value stocks. In short, we believe that the IT sector will underperform in the short to medium term, however, we can’t brush off the importance of digitization in the long term, the ability to scale using IT, and the rising importance of cloud migration, thus we believe that despite short and medium-term hiccups, Indian IT companies will perform well in the long term.
On the derivatives front, the highest call options OI is at 17,500/17,400 strike price followed by 17,200 while on the put side, the highest put OI is at 17,000 strike price followed by 17,200 levels, said Sumeet Bagadia, Executive Director, Choice Broking. He said, "Technically, the index has formed a Doji candlestick on the daily chart but closed below the Middle Bollinger Band formation & 100-Days Exponential Moving Averages that suggests bearish moves for the coming day. An indicator MACD & Stochastic witnessed a negative crossover on the daily time-frame, which supports the bearish sentiments. At present, the index is having support at 17,000 levels while resistance is placed at 17,370 levels. On the other hand, Bank nifty has support at 36,200 levels while resistance at 37,400 levels."
Markets open in red
The market opened in the red today as it factored in the HDFC Bank and Infosys results, both of which displayed some weakness. The cascading effect of the same has seen the other banking and IT stocks too on the losing side. More importantly, the dip in the market has been sharp since Banking and IT sector account for over 50% of the Nifty index weight.
The rise in oil which is now over $110/bl too has contributed to the overall weakness in the market. Globally too the sentiment is weak, with the dollar index now above 100 and the US 10 year above 2.80 percent. The only sectors relatively holding out today are the Metal and FMCG sectors, said Vineet Bagri, Managing Partner- TrustPlutus Wealth. Post-the close to 2 percent fall in the markets today, the 1-year forward P/E multiple now stands around 20x which is a fair valuation level. If we see further dips this week, we believe sentiments would sour further and risk averseness would go up considering the fact that the result season has not started off on a good note. Nonetheless, we suggest slow and steady buying of the dips especially for long term investors and not shy away from the market entirely, Bagri added.
Benchmark indices ended the day’s session on a negative note, with Sensex and Nifty 50 ended a session with losses, dragged by IT after Infosys slid 9 percent on missing March-quarter profit estimates and also US equity futures declined amid a deepening crisis in Ukraine, said Mohit Nigam, Head - PMS, Hem Securities. Treasury yields rose, as a jump in energy costs amid rising concerns over inflation concerns. Japanese shares fell, as did S&P 500 and Nasdaq 100 contracts. Nifty 50 closes its day below good resistance zone of 17,300 and if index holds below 17,300 mark for coming trading sessions then we may see more downward move towards 16,800-16,500 mark which are another support zone on the downside, added Nigam.
Investors' wealth tumbles over Rs 3.39 lakh cr
In morning trade on Monday (April 18), investors' wealth tumbled over Rs 3.39 lakh crore as equity markets went into a tailspin, with the Sensex plunging 1,291.93 points.
The BSE benchmark index tanked 1,291.93 points to 57,047 in morning trade after a weak opening. Tracking the weak trend in equities, the market capitalisation of BSE-listed firms tumbled Rs 3,39,088.04 crore to Rs 2,68,63,975.53 crore.
Rupee slips 6 paise to 76.25 against US dollar
The rupee declined 6 paise to close at 76.25 (provisional) against the US dollar on Monday, tracking the strength of the greenback overseas and elevated crude oil prices.
At the interbank foreign exchange market, the rupee opened lower at 76.41 against the American currency, and finally settled for the day at 76.25, down 6 paise over its previous close.
During the trading session, the rupee witnessed an intra-day high of 76.20 and a low of 76.43.
On Wednesday, the rupee had dipped 4 paise to close at 76.19 against the US dollar.
Asian markets weak
In Asia, markets were trading lower, with Seoul, Shanghai and Tokyo quoting in the red.
Brent crude gains
International oil benchmark Brent crude gained 0.62 per cent to $112.39 per barrel.
FIIs offload shares
Foreign institutional investors continued to offload shares worth Rs 2,061.04 crore on Wednesday, according to exchange data.
Stock markets were closed on Thursday for Mahavir Jayanti and Dr Babasaheb Ambedkar Jayanti, as well as on Friday on account of Good Friday.
(With inputs from Reuters, Agencies)
