The weak onset of March quarter earnings weighed on market sentiment as frontline indices the Sensex and the Nifty snapped their nine-day winning streak on April 17, with shares of Infosys and HDFC twins as top drags.
Shares of Infosys, which emerged as the top drag on the Sensex, fell over 9 percent after it reported a weak set of numbers for the March quarter of FY23 (Q4FY23).
Infosys' revenue fell 3.2 percent sequentially in Q4FY23 while EBIT margin at 21 percent was also below Street’s expectations of 21.5 percent. Brokerage firms found its FY24 revenue growth guidance of 4–7 percent and margins of 20–22 percent disappointing.
Post the March quarter results, many brokerages downgraded the stock and almost all cut their target prices and earnings estimates for FY24 and FY25.
After Infosys, HDFC twins were the top drags even though HDFC Bank reported broadly in-line earnings for Q4FY23. Both stocks fell prey to profit-booking as they hit their 52-week highs in intraday trade on BSE before ending in the red.
Most brokerages retained their ‘buy’ calls on the HDFC Bank stock and raised their target prices after its Q4 results.
TCS shares also continued declining after the IT bellwether posted below-expected quarterly numbers.
Weak earnings of IT majors and their sombre outlook roiled market sentiment. Along with shares of Infosys and TCS, those of Tech Mahindra, HCL Tech and Wipro also ended in the red in the Sensex index.
The BSE IT index ended almost 5 percent lower with most stocks in the red.
Global markets were mostly positive. China's Shanghai Composite Index rose 1.40 percent while Japan's Nikkei ended flat. European markets traded in the green.
Sensex closed 520 points, or 0.86 percent, lower at 59,910.75 while the Nifty settled at 17,706.85, down 121 points, or 0.68 percent.
Mid and smallcaps outperformed the benchmark significantly. The BSE Midcap and Smallcap indices closed 0.56 percent and 0.13 percent higher, respectively.
Even though the benchmarks ended in the red, as many as 139 stocks, including HDFC Bank, HDFC, ITC, DLF, Dr Reddy's Labs and UltraTech Cement, hit their 52-week highs in intraday trade.
Oil prices were steady as investors eyed Chinese economic data for signs of demand recovery in the world's second-largest oil consumer, reported Reuters. Brent Crude traded near the $86 per barrel mark.
The rupee fell 12 paise to close at 81.97 per dollar, Bloomberg data showed. A strong dollar and weak domestic equities weighed on the domestic currency.
Top Nifty gainers and losers
As many as 31 stocks ended in the green while 19 in the red in the Nifty index.
Shares of Nestle (up 3.90 percent), Power Grid (up 2.16 percent) and SBI (up 2.15 percent) ended as the top gainers in the Nifty index.
On the flip side, shares of Infosys (down 9.37 percent), Tech Mahindra (down 5.18 percent) and HCL Tech (down 2.76 percent) ended as the top losers in the Nifty pack.
Nifty IT top sectoral loser; PSU banks shine
Most sectoral indices ended in the green. Nifty PSU Bank surged 3.13 percent while FMCG, Realty and Oil & Gas rose up to a percent. Nifty Bank closed 0.31 percent up.
On the flip side, Nifty IT ended with a loss of 4.71 percent with all components in the red.
Nifty Pharma (down 0.60 percent), Healthcare (down 0.53 percent), Media (down 0.39 percent) and Financial Services (down 0.14 percent) also ended in the red.
Analysts' views on markets
“The much-anticipated profit-taking came to the fore as technology stocks led the correction that saw the Sensex slump below the psychological 60,000 mark. The real damage was done by the frontline IT stocks with Infosys coming under severe hammering after its corporate earnings failed to meet street estimates," said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.
"Besides disappointing results, worries of weak IT spending by multinational giants on gloomy economic conditions and recessionary fears have weighed heavily on the sector over the past few months," Chouhan said.
Vinod Nair, Head of Research at Geojit Financial Services observed that the market responded negatively to the weak start of the earnings season by IT bellwether and their cautious outlook.
On the global front, the US 10-year bond yield rose as solid US job data raised concerns over further rate hikes by the Fed.
"The earnings reports, primarily from the IT and banking sectors, will influence market trends in the coming days. We expect Nifty50 earnings to grow by 10 percent in Q4FY23, driven by banking and finance, auto, telecom, and FMCG," said Nair.
Technical views on markets
Chouhan pointed out that on the daily charts, the Nifty has formed a bar-reversal candlestick formation indicating time-based correction till the market is not crossing 17,870 levels.
"For the bulls, 17,800-17,870 would act as immediate resistance zones while 17,600-17,500 would act as key support zones. Fresh buying momentum could be seen only above the levels of 17,870,” said Chouhan.
Rohan Patil, Technical Analyst, SAMCO Securities pointed out that Nifty made an intraday low at 17,574.05 in the first 45 minutes of trade and then it made a strong base near 17,650.
The index continued to move higher at a muted pace throughout the day. The benchmark index recovered almost 50 percent of its intraday losses but still formed a bearish engulfing candlestick pattern on the daily timeframe. The index, on the daily chart, has retested its channel pattern breakout levels at 17,650 and it succeeded in holding that.
"Technically, a tall bearish candle after breakout suggests a rangebound movement in further trading sessions. The overall trend is positive as prices are trading above the breakout levels of the falling channel pattern. The support for the Nifty is placed at around 17,600 – 17,550 levels and resistance is capped at the 17,900 level. In case the Nifty breaches below 17,550 then 17,400 will be the next support level, said Patil.
Key market data
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.