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Benchmark indices closed in the red on Friday, dragged by profit-booking financials, auto and IT.
Market opened on a negative note amid weak global cues. Inflation concerns post US Fed's June meeting along with rising cases of the Delta variant around the globe impacted investor sentiments. Indices extended losses in the second half, tracking losses in heavyweights such as TCS, Reliance,and HDFC Bank.
The BSE Sensex closed at 52,386.19, down 182.75 points or 0.35 per cent. It hit an intraday high of 52,555.73 and a low of 52,228.01. The Nifty 50 closed at 15,689.80, down 38.10 points or 0.24 per cent. It hit an intraday high of 15,730.85 and a low of 15,632.75.
Breadth turns positive
However, the breadth of the market turned positive with 1,898 stocks advancing, 1,294 declining and 161 remaining unchanged on the BSE. As many as 483 securities hit the upper circuit and 191 the lower circuit; 400 hit their 52-week high while 17 touched a 52-week low.
Binod Modi, Head Strategy at Reliance Securities, said, “Domestic equities traded in a weak note today mainly led by continued profit booking in financials. However, metals, pharma and realty indices did shine, while IT index remained soft today after TCS missed earnings estimates.”
“While visible improvement in business momentum with ease of business curbs by states started offering comfort, recent uptick in daily caseload and increasing positive rate could be a near term risk as we saw Japan imposed fresh restrictions in Tokyo yesterday,” added Modi.
Tata Steel, Bajaj Finserv, Adani Ports, Bharti Airtel and Divi’s Labs were the top gainers on the Nifty 50 while Bajaj Auto, TCS, HDFC Bank, Reliance and Axis Bank were the top laggards.
Vinod Nair, Head of Research at Geojit Financial Services said, "The domestic market continued to be under the grip of bears following weak Asian peers as investor confidence was shattered due to the global spread of Delta virus variant. The equity market is turning risk-averse and side-lined.”
“The IT sector also turned bearish as the initial earnings results did not meet the expectations of the market. While the focus of domestic investors has shifted from secondary to attractive primary IPOs, affecting the liquidity of trading in the equity market which we believe to be short-term,” added Nair.
TCS down 1.4% at closing
The shares of Tata Consultancy Services closed one per cent lower after the company’s Q1 2022 results failed to meet Street estimates. The company closed 1.43 per cent lower on the NSE at ₹3,211.80.
The company on Thursday announced a 28.5 per cent increase in net profit to ₹9,008 crore during the first quarter of this fiscal compared to ₹7,008 crore in the same period last year. But, on a sequential basis, the profit fell by 2.5 per cent compared to ₹9,246 crore in Q4 of FY21.
The company’s consolidated revenue from operations jumped to ₹46,132 crore in the first quarter from ₹38,920 crore in the same period last year.
ICICI Securities downgraded the rating of the company from Hold to Reduce with a target price of ₹2,935.
“While India business is likely to see a pent-up in Sep-21, Europe is guided to remain soft for another 1-2 quarters. In the likely scenario of clients returning to offices, management indicated office work may become inevitable. Further, TCS expects most of its discretionary costs (including travel) to return by the end of the Fiscal,” it said in its report.
“This result and commentary reinforce our anti-consensus argument that growth and margins of the industry in the post-covid equilibrium will be largely similar to pre-covid levels (elaborated in our Oct-20 thematic). As disappointments (on consensus earnings) related to this continues, the current lifetime-high multiples (30x FY23E EPS) are unlikely to sustain. We downgrade the stock to REDUCE (from Hold earlier),” it said.
However, Yes Securities maintained a Buy rating with a target price of ₹3,600, seeing an upside of 10.6 per cent. Motilal Oswal Research maintained a Neutral rating on the stock with a target price of ₹3400, seeing a 4 per cent upside.
Financials, IT and Auto drag
On the sectoral front, financials, auto and IT lagged, while metal and pharma rebounded sharply.
Nifty Bank and Nifty Financial Services were down 0.57 per cent and 0.47 per cent, respectively. Nifty Auto was down 0.34 per cent while Nifty IT was down 0.30 per cent on profit-booking.
Nifty Metal was up 1.99 per cent while Nifty Pharma was up 0.64 per cent. Nifty Realty also gained and was up 2.38 per cent.
Broader indices
Broader indices outperformed the benchmarks.
Nifty Midcap 50 was up 0.80 per cent while Nifty Smallcap 50 was up 0.53 per cent. The S&P BSE Midcap was up 0.61 per cent while the S&P BSE Smallcap was up 0.39 per cent.
The volatility index softened 4.55 per cent to 12.94.
“Notably, buying momentum remained visible in midcap and smallcap stocks as improved earnings prospect attracted investors’ interest. Volatility index softened over 4% today and fell below 13,” said Modi.
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