The stock market is bleeding on the first trading session of this week as investors showed a frenzy selling in major tech stocks after a disappointing fourth quarter from biggies like TCS and Infosys. HDFC Bank was also under pressure post its Q4 prints. These three are heavyweights on exchanges. On Monday, Sensex and Nifty 50 snapped their 9 consecutive days rally to dive by around a percent. With IT stocks in a free fall, Infosys, Tech Mahindra, and HCL Tech emerged as top underperformers to drag the overall indices. Sensex has erased its psychological mark of 60,000 and Nifty gives up 17,700 levels.
At the time of writing, Sensex traded at 59,854.91 down by 576.09 points or 0.95%. But the 30-scrip benchmark has nosedived by 988.53 points overall in the day with an intraday low of 59,442.47.
Nifty 50 dipped by 145.95 points or 0.82% to trade at 17,682.05. The benchmark has slipped by at least 254 points after touching an intraday low of 17,574.05.
Broadly, markets witnessed buying, however, a hysterical selloff in IT stocks has erased the gains. On BSE, even the Midcap and Smallcap indexes were marginally up. While except for healthcare, capital goods, and IT stocks, the rest sectoral indices saw a positive sentiment.
BSE IT index witnessed a flash drop of 1,404.83 points or 4.98% to trade at 26,830.37. During the day, the index plunged by nearly 1921 points with an intraday low of 26,314.34.
On Sensex, the top losers were — Infosys shedding nearly 10% followed by Tech Mahindra down by 5%, and HCL Tech diving by 3%. Stocks like L&T, HDFC, NTPC, Wipro, HDFC Bank, and TCS dipped between 1% to 2%.
Among the top gainers on Sensex were — Nestle India surging by 4.4% followed by Power Grid up 2.4%, SBI gaining by 1.9%, while Kotak Bank and IndusInd Bank zoomed by 1.6% each. ITC was also up over 1%.
Although HDFC Bank was in red after Q4 results, however, buying in SBI, IndusInd and Kotak lifted overall BANKEX and Bank Nifty as both the indexes were marginally up.
Markets were on a winning spree from March 29th to April 13. During these 9 days, Sensex skyrocketed by over 2,817 points or 4.9%. While Nifty 50 jumped by over 876 points or 5.2%.
Explaining the reason behind why markets tumbled today, Sonam Srivastava- Founder at Wright Research- an investment advisory firm, said, “The market is down today due to disappointing Q4 results from top-tier IT companies, TCS and Infosys, which have missed street estimates amid global uncertainties. This has set a subdued tone for the IT sector’s Q4 performance. Experts predict the next 1-2 quarters will be choppy for the industry but are hopeful of a subsequent recovery.”
According to Srivastava, the management commentary from India’s top two IT services companies has cautioned about customer sentiment across BFSI, technology services, and other verticals, particularly in the US. Factors like unplanned project ramp-downs, customer decision-making delays, and clients deferring non-critical initiatives have contributed to the weak performance.
Futher, she highlighted that the industry experts see a cautious Q1FY24 and expect growth to return in Q2FY24. Uncertainties in the US market may decrease in the April-June quarter. Still, new work could take another 1-2 quarters to materialize, indicating that October-November might be a better time for the industry.
“While the softness in earnings may continue for a few quarters, growth is expected to return as the US economy remains robust post-Covid, and clients sign up for big contracts to further reduce costs. However, the slowdown in the BFSI segment, which is high on the digital maturity curve, may mute growth for IT over the next three to four quarters,” Srivastava added.
Further, Divam Sharma- Founder at Green Portfolio PMS said, “The IT sector has been a drag on the markets today on negative commentaries coming on the outlook from key developed markets including the US.”
Sharma added, “With a high probability of recession in the US, UK, and many European countries, we see uncertainties continuing around the order outlook for the next 1-2 quarters. However, some good value opportunities are gradually emerging in the sector. Infosys is now trading at a PE multiple of 21.2 times, anything below 19 times is a great opportunity for investing in the stock.”
Meanwhile, as per Mitul Shah – Head of Research at Reliance Securities, the 4QFY23 earnings season will pick up the pace in the coming weeks. Meanwhile, mixed signals are emerging from the US, Europe, and Chinese economic data. Inflation although declining, continues to run high in US and Europe. Initial signs of recession are emerging from the US jobs data and the TCS and Infosys management commentary. Chinese recovery is still below expectations.
In India, Shah added, “Inflation has eased while growth is steadily picking up pace led by accelerated govt capex and PLI investments. Services exports are strong offsetting the slowdown in the merchandise exports and boosting India’s forex reserves. In the coming weeks, investors will parse the earnings outcome of the March quarter and closely follow the management commentary for further cues. Brent crude prices continue to remain strong at $86.5/barrel.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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