BackSensex, Nifty at 10-week closing lows
India's markets fare second-worst in the world as tepid earnings and reforms impasse hurt investor sentiment
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Mumbai: India’s benchmark equity indices on Wednesday hit their lowest close in more than 10 weeks, and the country’s stock markets fared the second-worst among world equities, as tepid earnings and concerns of legislative hurdles to the reform process hurt investor sentiment.
BSE’s 30-share Sensex shed 1.48% or 381.95 points to close at 25,482.52, while National Stock Exchange’s 50-share Nifty shed 1.35% or 105.75 points to close at 7,731.80. It was the lowest close since 8 September for both indices.
Sensex has dropped 6.88% in the past one month, and is the worst-performing equity index in the world after Saudi Arabia’s Tadawul All-Share Index, which lost 10.59%. The market capitalisation of BSE companies has fallen by ₹ 4.12 trillion, dropping below the ₹ 100 trillion to hit ₹ 96.23 trillion.
“We have not had earnings growth for six quarters now, and the visibility is weak as to where it will come from. That is making it difficult for the market to hold on to current levels," said Saurabh Mukherjea, chief executive at Ambit Capital Pvt. Ltd, a brokerage.
Net sales growth of top Indian companies for the three months ended September fell for the second consecutive quarter as demand continued to be tepid in Asia’s third largest economy and manufacturers’ pricing power remained weak, a Mint analysis had showed on Monday
Also, with another lukewarm quarter came in yet another round of cuts in earnings estimates.
In a note on Monday, Kotak analysts Sanjeev Prasad, Akhilesh Tilotia and Sunita Baldawa said they now project the FY16 and FY17 net profits of the Nifty to grow 8% and 20%, respectively, versus 14% and 19% at the start of the second-quarter earnings season.
“We see another two to three quarters of earnings cuts until the economy gathers momentum. Rich valuations and likely earnings cuts may keep the market subdued for some more time," the analysts said in the note.
Mukherjea of Ambit also pointed that legislative reforms seem to be off the agenda, given the impasse in Parliament.
“Our view has been bearish on the market since March; we remain circumspect about the prospects of the market going ahead," he said.
Since the begining of 2015, Sensex has fallen 7.33%. Foreign institutional investors have been net buyers of Indian shares to the tune of $3.95 billion in that period but so far this month they have sold a net of $442.25 million.
So far in 2015, domestic institutional investors have pumped in a net of ₹ 56,872.19 crore and so far this month, they have parked a net of ₹ 3,823.14 crore.
Adding to India’s woes, for the first time in more than a year, global investors have gone back to being neutral on Indian markets compared with the overweight position they held since October 2014, shows the latest edition of the Bank of America Merrill Lynch Fund Managers’ survey on Tuesday.
“Based on our Asia Pacific ex-Japan investor panellists, India has fallen out of favour from being most overweight to neutral, something not seen since October 2014," said the survey.
BSE Consumer Durable Index is the only one which has logged a positive return over the last one month, adding 1.98%.
The worst-performing sectors in the same period were BSE Realty Index, BSE Capital Goods Index and BSE Healthcare Index, which have slumped 12.43,%, 11.32% and 10.53%, respectively, in the same period.
Over a month, only three Sensex stocks, Maruti Suzuki India Ltd, NTPC Ltd and Tata Motors Ltd, reported gains, rising 1.68%, 4.60% and 7.12% respectively. The worst performers were Dr. Reddy’s Laboratories Ltd, Bharat Heavy Electricals Ltd and Vedanta Ltd, which lost 22.16%, 18.43% and 17.56%, respectively.
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