Nifty 50 slid for the second week in a row, 27 stocks shut in the red

As the Indian stock market maneuvered through a shortened trading week, comprising only three open sessions due to public holidays, the Nifty 50 encountered its second consecutive week in the red. The continued underperformance of banking heavyweights cast a lingering shadow over the market, significantly impacting the index's overall performance.

In addition, the dimming hopes for an early rate cut by the US Fed, geopolitical tensions in the red sea, and rising US bond yields have also dampened investors' sentiment. This led them to book profits amid a significant rally in the Indian stock market in CY23, causing stocks to trade at expensive valuations. Foreign portfolio investors (FPIs) have withdrawn ₹12,140 crore from Indian equities this week alone.

Also Read: FII selling in Indian stock market may continue despite ₹27,000 crore outflow in Jan so far, say analysts; here's why

Subpar results

The Q3 FY23 earnings season, thus far, has failed to provide the robust momentum needed to boost investor sentiment. Banks are grappling with tightening credit costs, adversely affecting their Net Interest Margins (NIMs). Despite strong performance in other metrics like loan growth and asset quality, the decline in NIMs has raised concerns among investors, given its significance in assessing a bank's profitability and financial health. Analysts expect that the NIMs will be more likely to remain under pressure for 2–3 quarters.

Further, major IT companies have reported mixed earnings. This scenario has added to the cautious approach among investors, affecting overall market dynamics. Further, FMCG Major Hindustan Unilever (HUL) posted weak numbers for the December ending quarter, propelling its stock to touch an 18-month low during Tuesday's trading session.

Additionally, concerns over increasing crude oil prices and China reportedly seeking to inject 2 million yuan into its declining stock market have further weighed on investors. This situation is expected to influence FPI flows, especially considering the already elevated valuations of the Indian market.

Also Read: Oil prices rise 2% driven by Red Sea tensions, US crude stock draw; Brent reaches $81/bbl

27 stocks finished the week in the red

Amid this backdrop, Nifty 50 concluded the week in negative territory, registering a decline of over 1%, settling at 21,352 points. Among the index constituents, 27 finished the week in the red, with Asian Paints leading the decline with a fall of 6.8%. Following closely were IndusInd Bank, Axis Bank, HDFC Life Insurance Company, HUL, HDFC Bank, Divi's Laboratories, Wipro, Bajaj Finance, State Bank of India, Tech Mahindra, Tata Consultancy Services, and ITC, all experiencing drops between 1.5% and 6.5%.

On the positive side, Bajaj Auto's stock touched a new all-time high of ₹7,625 apiece, finishing the week with a gain of 7.3%. Bharti Airtel shares also reached a record high of ₹1,200 apiece, propelling the company's market capitalization close to the ₹7 lakh crore mark. Power-related stocks, including NTPC and Power Grid Corporation, also achieved new highs at ₹325 and ₹248, respectively.

Also Read: HDFC Bank, ICICI, Axis, Kotak Bank shares volatile as Q3 results reflect margin pressures; here’s why banks are falling

Commenting on the market performance, Vinod Nair, Head of Research at Geojit Financial Services, said," The broader market is unable to hold gains due to high valuations, subpar results, and persisting geopolitical tension in the Middle East, followed by an F&O expiry weighing down the market. Going forward, global market factors like the policy rate decisions of major countries will affect the market, and markets are likely to witness stock-specific actions during the ongoing earnings season."

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.