Continuing their downward trend, benchmark indices on Thursday closed at their lowest levels in nearly two months as underwhelming earnings and continued selling by foreign portfolio investors (FPIs) weighed on sentiment.
Nifty ended the day 221.45 points or 0.9% lower at 24,749.85 points, with Bajaj Auto tanking 13% to be the biggest loser after reporting weak earnings for the September quarter. The Sensex, too, fell 494.75 points or 0.6% to close at 81,006.61.
Thursday marked the 13th consecutive session of selling by FPIs in India as they pulled out shares worth Rs 7,421.40 crore, according to provisional data. On the other hand, domestic institutional investors (DIIs) bought Rs 4,979.83 crore of shares on Thursday.
So far in October, FPI outflows have risen to $8.5 billion (Rs 71,393 crore), the highest ever on record in a month, surpassing even the Covid pandemic sell-off seen in March 2020. Cushioning the impact of this sell-off, DIIs have bought shares worth Rs 68,961 crore.
The Rs 27,870-crore public issue of Hyundai Motor India is also likely to have led to some outflows from the secondary market on Thursday, as it was the last day for subscribing to the automobile major’s initial public offering (IPO) shares, analysts said.
With Thursday’s fall, the key indices have declined in 9 out of 12 sessions this month, indicating sluggishness among investors. The indices are down around 4% each for the month and nearly 6% off their record high levels. Apart from weak earnings, global factors such as China stimulus measures and geopolitical risks have also kept investors on the edge.
“The real bad news today was the commentary from Bajaj Auto, saying that festive season is not looking that great. It’s affecting sentiments,” said Andrew Holland, CEO of Avendus Capital Alternate Strategy. “And even other results coming out are showing real pressure on margins across different sectors. The worry is that the results season is really not going to help the market.”
The commentary from Bajaj Auto weighed on the shares of other automobile companies as well. The Nifty Auto index slipped 3.5% with Tata Motors, Ashok Leyland, Maruti Suzuki India, Hero MotoCorp, and Mahindra & Mahindra falling 1-4%.
Shares of financial services and fast-moving consumer goods companies were also among the worst hit. While the Nifty Bank index fell 1%, the Nifty FMCG index ended 1.6% lower after Nestle India’s lower-than-expected earnings.
The BSE Smallcap and the BSE Midcap indices fell 1.4% and 1.7%, respectively. The selling was broad-based across all the sectoral indices, barring Nifty IT, ending lower on the NSE.
With FPI selling likely to continue and expectations of weak earnings growth for the September quarter, experts do not see a quick recovery for equities.
Macquarie said India versus China remains the single-most important question facing emerging market investors. “It is becoming harder to make this choice,” it said in a note.
The global brokerage firm said while China continues to face structural challenges to its economy, India has triple negatives – weakening GDP growth, high earnings growth expectations, and historically highest valuation multiples.
“It is quite possible that further announcements may propel China’s equities, even as structural issues fester. But this is mostly a trading, not an investment call, which still heavily favours India,” it added.
Nevertheless, Holland believes domestic equities may see another 5% correction going ahead, adding that a lot would depend on the earnings performance.