The Indian stock market closed in a flat-to-negative trajectory today as the Nifty 50 fell slightly by 0.15%, ending at 24,399, while the Sensex dipped marginally by 0.02%, closing at 80,065. The decline in the market was primarily driven by weak earnings from the FMCG and real estate sectors. Despite the efforts of public sector banks, the overall market sentiment remained subdued.

Key Sectors Dragging Down the Market:

The FMCG sector faced significant pressure, with Hindustan Unilever Ltd (HUL) leading the losses, declining nearly 6%. The weak earnings of HUL, which reported a slower-than-expected performance due to subdued consumer demand, particularly in urban markets, created a ripple effect across the Nifty FMCG index, which declined by 2.83%. This brought the index to its lowest point since early July. Britannia Industries, ITC, Nestle India, and Tata Consumer were among other FMCG stocks that registered losses exceeding 1%.

Similarly, the realty sector also struggled, with the Nifty Realty index falling by 1.13%. The sector has been grappling with high interest rates and muted demand, which led to a weak performance in several real estate stocks.

Public Sector Banks Shine Amid Market Weakness:

Contrary to the performance of FMCG and realty stocks, public sector banks provided a ray of hope to the market. Bank of Baroda, Punjab National Bank, and State Bank of India witnessed strong gains, with their stock prices rising by up to 3%. The strength of these banks can be attributed to healthy earnings and positive outlooks for the financial sector. The Nifty Bank index rose by 0.35%, reflecting the upward momentum in the banking space.

Market Overview:

Mid-cap and small-cap stocks, which showed resilience in the previous session, also faced declines today. The Nifty Midcap 100 and Nifty Smallcap 100 indices closed 0.32% and 0.20% lower, respectively. FII outflows continued to be a major headwind, with foreign institutional investors pulling out significant capital from Indian markets. According to NSDL data, FII selling touched ₹93,088 crores by October 23rd.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that elevated valuations in India, coupled with more attractive opportunities in markets like China and Hong Kong, have contributed to this outflow. He advised investors to be cautious, suggesting that high-quality financials and IT stocks can be accumulated during market dips.

Sectoral Performance: FMCG, Realty Down; Banking Stocks Up:

The underperformance in the FMCG sector was largely due to disappointing earnings reports from companies like HUL and ITC. HUL’s management cited that while urban growth had slowed, rural demand showed some signs of recovery. Despite this, the stock touched a four-month low during today’s session. The broader Nifty FMCG index has now corrected by 12% from its all-time high, which it reached earlier in the year.

In contrast, banking stocks, particularly in the public sector, saw solid gains. HDFC Bank, Axis Bank, and IndusInd Bank also posted moderate increases, with the private sector banks showing resilience. Overall, the banking sector remains a bright spot in an otherwise lackluster market.

Gainers and Losers:

Among individual stocks, Piramal Pharma was the top gainer, surging by 18% to ₹257 after reporting strong results for the September quarter. Similarly, Sona BLW Precision Forgings rose by 14%, benefiting from its agreement with Escorts Kubota to acquire its railway equipment business for ₹1,600 crore. The company's robust earnings also contributed to the surge in its stock price.

On the downside, KPIT Technologies took a hit, plunging 13.6% after it posted weaker-than-expected quarterly results. The company attributed its cautious guidance to delayed program launches, which affected its performance in the second half of FY25.

Other stocks that saw significant declines included Dr. Lal Pathlabs, which was down by 2%, and Hindustan Unilever and VIP Industries, both of which posted notable losses.

Expert Insights:

Market experts have warned that the FII outflows and concerns over a slowdown in corporate earnings are likely to continue weighing on Indian markets in the near term. Dr. V K Vijayakumar emphasized that the market's current structure suggests a 'sell on rally' strategy, where investors should be cautious about chasing temporary gains.

High valuations in India, coupled with lower earnings growth, have turned some foreign investors towards more reasonably priced markets like China and Hong Kong. Nevertheless, there is still optimism in certain sectors, particularly banking and digital stocks, which continue to exhibit strong growth prospects.

Key Corporate Movements and Earnings Reports – 24th October 2024

Dr Lal Pathlabs Sees Short Buildup in October 31 Futures

Dr Lal Pathlabs is witnessing a short buildup in its October 31 futures series, with open interest increasing by 33%. The put-call ratio stands at 0.6, indicating some cautious sentiment around the stock's future price movements. Despite the futures market movements, its Q2FY25 net profit increased by 18.2% YoY to Rs 129.2 crore, driven by lower finance costs and depreciation. Revenue rose by 10.1% YoY to Rs 682.1 crore, supported by an uptick in testing volumes and patient inflows.

Ramkrishna Forgings Posts 130.9% Profit Rise in Q2FY25

Ramkrishna Forgings saw a substantial net profit increase of 130.9% YoY to Rs 189.8 crore in Q2FY25. This jump was aided by inventory destocking and a one-time gain of Rs 95 crore from the sale of its subsidiary to Yatra Online. The company's revenue grew by 17% YoY to Rs 1,056.1 crore, primarily driven by higher sales of forging components. The company has also been noted for reducing its debt, a factor that is drawing investor attention.

KEC International Secures Rs 1,142 Crore Orders

KEC International has bagged orders worth Rs 1,142 crore across various sectors. The Transmission & Distribution (T&D) business continues to shine, with significant projects like a 380 kV transmission line in Saudi Arabia and supply orders from the Americas. In India, the company is involved in railway bridge construction and cable supply projects. The new orders reinforce KEC’s strong presence in the infrastructure space.

Ujjivan Small Finance Bank Net Profit Declines 28.9%

Ujjivan Small Finance Bank posted a 28.9% YoY decline in net profit to Rs 233 crore in Q2FY25, despite a 15.9% increase in revenue to Rs 1,612.8 crore. The revenue boost came from improvements in treasury, wholesale, and retail banking. However, the bank's asset quality deteriorated, with gross NPAs expanding by 17 basis points (bps) and net NPAs increasing by 47 bps YoY.

TVS Motor Co Shares Dip as Q2FY25 Results Disappoint

TVS Motor Company’s shares fell by over 3% after its Q2FY25 results fell short of analysts' expectations. Kotak Institutional Equities maintained its ‘Sell’ rating on the stock but raised the target price to Rs 1,850, citing high valuations. The brokerage remains optimistic about the company's medium-term growth due to rising EV two-wheeler sales, steady ICE segment demand, and improving exports.

Tata Consultancy Services Launches AI Unit with NVIDIA

Tata Consultancy Services (TCS) announced the launch of a new AI unit in partnership with NVIDIA. The unit aims to accelerate AI adoption across various industries by offering industry-specific AI solutions. This collaboration will leverage TCS' global Centres of Excellence (CoEs) along with NVIDIA's cutting-edge AI platforms to drive transformative AI strategies.

ICICI Direct Upgrades Ultratech Cement to ‘Buy’

ICICI Direct upgraded Ultratech Cement to ‘Buy’ from ‘Hold’ with a target price of Rs 13,500, indicating a potential upside of 22.1%. The brokerage expects the company to benefit from a pick-up in demand and cost-saving initiatives, forecasting a CAGR of 22.6% in net profit over FY25-27.

Ashok Leyland Subsidiary Wins Major Electric Bus Order

Ashok Leyland's electric mobility subsidiary, OHM Global Mobility, secured a significant order from the Metropolitan Transport Corporation (MTC) of Chennai for 500 ultra-low-floor electric buses. This marks another step forward in Ashok Leyland's push toward electric mobility solutions.

Zydus Lifesciences Gets WHO Approval for Typhoid Vaccine

Zydus Lifesciences has received WHO approval for its Typhoid Vi conjugate vaccine, ZyVac TCV, making it eligible for procurement by UN agencies. The vaccine is designed for individuals aged 6 months to 65 years, and it aims to combat typhoid in regions like India, Africa, and Southeast Asia.

RailTel Secures Rs 144.9 Crore Work Order from Gujarat Government

RailTel Corporation of India received a Rs 144.9 crore work order from the Home Department of the Government of Gujarat. The order involves supplying and installing CCTV surveillance systems across police stations and local intelligence bureaus, reinforcing RailTel's position as a key player in public sector technology solutions.

Other Notable Movements

• Piramal Enterprises posted a 238% YoY increase in net profit, aided by a one-time exceptional gain.
• Birlasoft shares declined after reporting a 15.1% QoQ drop in net profit.
• Metro Brands fell as its Q2FY25 profit missed estimates despite showing growth.
• Hindustan Unilever reported a 2.4% YoY decline in net profit, impacted by rising costs.

Conclusion:

In conclusion, the Indian stock market faced a challenging day as FMCG and realty sectors dragged the Nifty 50 and Sensex into a flat close. However, public sector banks provided a cushion, helping to limit the overall losses. Piramal Pharma and Sona BLW Precision emerged as the top gainers, while KPIT Technologies faced significant pressure following its earnings miss.

Going forward, market participants are advised to remain cautious, focusing on high-quality stocks and sectors with long-term growth potential. With FII outflows continuing to pose a major challenge, investors should look for opportunities in dips rather than chasing temporary rallies.

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