Informist, Wednesday, Jan 17, 2024
By Padmini Dhruvaraj
MUMBAI – The benchmark share indices suffered the biggest fall in nearly two years today as HDFC Bank's below-par December quarter earnings led to a sell-off in other banking and financial services stocks. The fall was exacerbated by the weekly options expiry of the Nifty Bank index, analysts said.
"Indian equity indices declined sharply today amid a selloff as heavyweight banks slumped after HDFC Bank posted its Q3 (Oct-Dec) results," Avdhut Bagkar, technical and derivatives analyst at StoxBox, said. Further, "concerns escalated among investors due to heightened tensions in the Middle East and fading expectations of a rate cut by the US Federal Reserve," he added.
The benchmark indices had opened lower due to weakness in other global equity indices, and fell deeper into the red as the day progressed. The Nifty 50 fell 460.35 points, or 2.1%, to 21571.95, making this one of the worst falls in nearly two years. The 30-stock Sensex fell a whopping 1628.01 points or 2.2% to 71500.76 points.
Shares of HDFC Bank fell 9% to a seven-week low of 1,528.40 rupees, following an overnight slump of 7% in its American despository receipts listed on the New York Stock Exchange, after the bank's Oct-Dec results disappointed the Street.
Though the net profit of India's largest private sector bank was above expectations, the net interest margin was flat on a sequential basis against hopes of expansion. The poor earnings also led to de-rating of the stock by multiple brokerages.
Nuvama Institutional Equities and Jefferies trimmed their respective share price targets and reduced the earnings estimates for the next two financial years. Nuvama downgraded the rating to 'hold' from 'buy and reduced the share price target by 40 rupees to 1,730 rupees, Jefferies cut the target price by 100 rupees to 2,000 rupees, retaining its 'buy' view.
"The bank has exhausted its LCR (liquidity coverage ratio), will need to lower its LDR (loan-to-deposit ratio), and is running slower than guidance on deposit growth," Nuvama said in its research report. Jefferies said the key miss was flat sequential growth in net interest margin even as the impact of the incremental cash reserve ratio and surplus liquidity receded.
The sharp fall and the weekly options expiry of Nifty Bank resulted in a sentimental sell-off in other heavyweight banking stocks such as Kotak Mahindra Bank, Axis Bank, ICICI Bank, and State Bank of India, analysts said. As a result, the Nifty Bank index tanked 2060.65 points or 4.3% to close at a six-week low of 46064.45 points.
"This week markets took a turn today with Nifty Bank falling 4% as HDFC Bank share price slipped on concerns around slowdown in deposit growth," Jaykrishna Gandhi, head of business development, institutional equities at Emkay Global Financial Services, said in a note. "As talks around rate cuts continue and as banks struggle with balancing credit growth vs margins, we are likely seeing a tactical rotation towards good quality NBFCs (non-banking financial companies)," he added.
The India VIX, known in market parlance as the volatility or fear gauge, rose 11.1% to close at a three-week high of 15.08 points. On the BSE, as many as 2,602 stocks out of 3,900 fell, 1,224 rose, and 74 were unchanged. "The weakness has taken over the positive bias, and if the index (Nifty 50) fails to recoup losses, the bears may find opportunities to seize control," said Bagkar from StoxBox.
Barring the Nifty IT index, all the other sectoral indices on the National Stock Exchange ended lower, with the Nifty Metal, Nifty Private Bank, and Nifty Financial Services declining 3.1-4.3%. Losses in the metal sector were led by Steel Authority of India and Tata Steel.
The Nifty IT rose 0.6%, with all the constituents of the index, barring Wipro, ending higher. Shares of HCLTech and L&T Technology Services were the top gainers in this sector. NSE's small- and mid-cap indices, which fell by 1.0-1.5%, were relatively better off than the benchmark indices.
LTIMindtree's Oct-Dec earnings, reported after market hours, came in line with analysts' estimates. The company's consolidated net profit rose to 11.69 bln rupees from 11.62 bln rupees in the September quarter. The consolidated revenue was at 90.17 bln rupees against 89.05 bln rupees reported in the previous quarter.
Going forward, analysts expect the benchmark indices to extend losses as banking stocks are expected to fall more, analysts said. HDFC Bank earnings and the "little bit of" tightening around lending norms by the Reserve Bank of India will continue to weigh on the banking and financial services stocks, Vinit Bolinjkar, head of research at Ventura Securities, said.
"We see no silver linings in the banking sector," Raj Deepak Singh, head of derivatives research at ICICI Direct Research, said, adding that any recovery in the banking sector will likely not sustain. Banking stocks are expected to underperform for the next 10-15 days, Bolinjkar said. Today, the Nifty Bank index ended 2060 points lower at 46064.45 points after it hit a one-month low.
The Nifty 50 index is expected to find support at 21400 points and face resistance at 21750 points. "We are of the view that, the current market texture is weak but oversold hence, we could see pullback rally if the Nifty 50 succeeds to trade above 20-day simple moving average of 21650," Shrikant Chouhan, head of equity research at Kotak Securities, said.
* Of the Nifty 50 stocks, 10 rose and 40 fell
* Of the Sensex stocks, 6 rose, 23 fell, 1 unchanged
* On the BSE, 1,224 stocks rose, 2,602 fell, and 74 were unchanged
* Nifty Bank: Down 4.28%; Nifty Financial Services: Down 4.28%; Nifty IT: Up 0.64%
BSE NSE
Sensex: 71500.76, down 1628.01 pts, or 2.23% Nifty 50: 21571.95, down 460.35 pts, or 2.1%
S&P BSE Sensitive Index Nifty 50
Lifetime High: 72720.96 (Jan 12, 2024) : Lifetime High: 21928.25 (Jan 12, 2024)
Record Close High: 72568.45 (Jan 12, 2024) : Record Close High: 21894.55 (Jan 12, 2024)
2024 1st day close: 72271.94 (Jan 1) : 2024 1st day close: 21741.90 (Jan 1)
2024 Closing High: 72568.45 (Jan 12) : 2024 Closing High: 21894.55 (Jan 12)
2024 Closing Low: 71355.22 (Jan 8) : 2024 Closing Low: 21448.65 (Jan 10)
2024 High (intraday): 72720.96 (Jan 12) : 2024 High (intraday): 21928.25 (Jan 12)
2024 Low (intraday): 71110.95 (Jan 10) : 2024 Low (intraday): 21448.65 (Jan 10)
2023 1st day close: 61167.79 (Jan 2) : 2023 1st day close: 18197.45 (Jan 2)
2023 Closing High: 72410.38 (Dec 28) : 2023 Closing High: 21778.70 (Dec 28)
2023 Closing Low: 59288.35 (Feb 27) : 2023 Closing Low: 17311.80 (Oct 17)
2023 High (intraday): 72484.34 (Dec 28) : 2023 High (intraday): 21801.45 (Dec 28)
2023 Low (intraday): 58699.20 (Jan 30) : 2023 Low (intraday): 17098.55 (Jan 17)
2022 1st day close: 59183.22 (Jan 3) : 2022 1st day close: 17625.70 (Jan 3)
2022 Closing High: 63284.19 (Dec 1) : 2022 Closing High: 18812.50 (Dec 1)
2022 Closing Low: 51360.42 (Jun 17) : 2022 Closing Low: 15293.50 (Jun 17)
2022 High (intraday): 63583.07 (Dec 1) : 2022 High (intraday): 18887.60 (Dec 1)
2022 Low (intraday): 50921.22 (Jun 17) : 2022 Low (intraday): 15183.40 (Jun 17)
2021 Closing High: 61305.95 (Oct 14) : 2021 Closing High: 18338.55 (Oct 14)
2021 Closing Low: 46285.77 (Jan 29) : 2021 Closing Low: 13634.60 (Jan 29)
2021 High (intraday): 61353.25 (Oct 14) : 2021 High (intraday): 18350.75 (Oct 14)
2021 Low (intraday): 46160.46 (Jan 29) : 2021 Low (intraday): 13596.75 (Jan 29)-
2020 Closing High: 47751.33 (Dec 31) : 2020 Closing High: 13981.95 (Dec 30)
2020 Closing Low: 25981.24 (Mar 23) : 2020 Closing Low: 7610.25 (Mar 23)
2020 High (intraday): 47896.97 (Dec 31) : 2020 High (intraday): 14024.85 (Dec 31)
2020 Low (intraday): 25638.90 (Mar 24) : 2020 Low (intraday): 7511.10 (Mar 24)
2019 High (intraday): 41809.96 (Dec 20) : 2019 High (intraday): 12293.90 (Dec 20)
2019 Low (intraday): 35287.16 (Feb 19) : 2019 Low (intraday): 10583.65 (Jan 29)
2018 High (intraday): 38938.91(Aug 28)) : 2018 High(intraday): 11760.20 (Aug 28)
2018 Low (intraday): 32483.8 (Mar 23) : 2018 Low (intraday): 9951.9 (Mar 23)
2017 High (intraday): 34005.37 (Dec 26) : 2017 High(intraday): 10515.10 (Dec 26)
End
Edited by Ashish Shirke
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