The slide was swift and sharp. After reaching an all-time high of 20,222 on September 15, the Nifty has dropped more than 1,000 points in less than a month, with IT, banking, and pharmaceutical companies bearing the brunt of the losses.
For equities investors, the festival season is everything but merry, with Dalal Street joining the global market selloff spurred by increasing US bond rates and escalating geopolitical concerns.
On October 26, the stock indices Sensex and Nifty fell for the sixth consecutive session. The Nifty fell below 19,000 for the first time since June 28, a psychologically significant milestone. Following a historic high of 20,222 on September 15, the Nifty has succumbed to selling pressure on the back of mixed second-quarter earnings.
The biggest losses
Wipro has been the greatest loss throughout this time, following dismal Q2 results. The Bengaluru-based IT services firm’s revenue fell for the third consecutive quarter, owing to a general downturn in its major verticals such as BFSI, communication, and manufacturing.
Wipro saw the slowest growth among its rivals. Analysts predict Wipro’s FY24 topline growth to be among the lowest among Tier-1 IT firms, based on the company’s dismal Q3 projection of -1.5 to -3.5 percent.
“Wipro is stuck between an undemanding valuation and weak business traction,” HSBC analysts wrote, retaining a “hold” recommendation on the company and a reduced target price of Rs 350 per share.
Tech Mahindra is second on the list after reporting a massive 61.6 percent drop in net profit at Rs 494 crore year on year in the September quarter, indicating a washout second quarter due to decreasing demand in the telecom and communications market and deal cycle delays.
In reality, the whole domestic IT sector is on the defensive, as rising interest rates and deteriorating consumer confidence in Western nations have resulted in a sustained slowdown in discretionary spending, causing delays in decision-making and deal conversions.
Adani Group flagship Adani Enterprises was also included on the list. The consequences of the Hindenburg report are still being felt. Adani Ports was as well.
HDFC Bank, which announced its first quarterly results following its merger with the parent Housing Development Finance Corporation (HDFC), has also underperformed.
While the Q2 results are not comparable to the pre-merger period, HDFC Bank’s management supplied proforma figures for the first quarter to show how the merged business will appear.
According to Jefferies, adjusted for the merger, HDFC Bank’s net profit fell by 2% sequentially, compared to the reported 33 percent increase.
The largest impact was on the net interest margin (NIM), which fell 70 basis points sequentially to 3.4 percent, compared to the 4 percent target that HDFC Bank has usually maintained.
A basis point is equal to one tenth of a percentage point.
The winning power supply
In contrast, throughout the Nifty’s 1,000-point drop, a PSU stock has been the best performer.
Coal India shares reached a 52-week high of Rs 319.55 on October 18 due to bullish analyst comments and persistent buying demand.
Nuvama Institutional Equities stated in a study earlier this month that the coal player provided the triple advantage of volume growth, increased e-auction pricing, and a likely all-time high dividend in H2FY24.
“Despite the stock rallying ~25 percent since Sep-23, we expect further upside potential of 35 percent within a year, excluding the dividend of Rs 30 in H2FY24E and Rs 25 in FY25E,” the brokerage said in a statement.