Market worries mount as Q2 profits drop, GDP slows

The Indian stock market is struggling to find excitement, despite Donald Trump’s return to power and the US Federal Reserve’s recent interest rate cut. Worse-than-expected second-quarter corporate earnings have raised concerns that second-quarter GDP growth could also disappoint. There is little sign of a continuation of the festive vehicle sales boom, or any recovery in other sectors. A falling rupee and expected increases in retail prices are adding to the negative sentiment. Crude oil prices briefly dropped but have since risen, adding to the market's worries. Even after Trump's victory, foreign investors have continued to sell on a large scale, which has contributed to the market's decline.

In the derivatives market, Gift Nifty closed at 24,332 on Thursday night, but this morning it had dropped to 24,279. This suggests that the Indian market is likely to open lower today.

Global markets

European markets closed higher yesterday, following the expected quarter-percent interest rate cuts by both the Bank of England and the US Federal Reserve. Fed Chairman Jerome Powell expressed satisfaction with the progress of the US economy, and notably stated that he would not resign even if President Trump asked him to, making it clear that Trump had no power to change him. The President-elect has been pushing for further interest rate cuts and easing regulations on banks.

While US markets continued to celebrate Trump’s victory on Thursday, the Dow Jones ended marginally lower. Other indexes corrected from their record highs. Shares in Trump ally Elon Musk’s Tesla rose 2.9% yesterday, after a 15% jump on Wednesday. Musk’s personal fortune soared by $26 billion in just two days, reaching $29 billion. Shares of Nvidia, the maker of artificial intelligence chips, rose by 2.24%, pushing its market value to Rs 3.65 lakh crore, now higher than Apple’s $3.44 trillion valuation.

The Dow Jones closed 0.59 points lower at 43,729.34, the S&P 500 rose 44.06 points (+0.74%) to close at 5,973.10, and the Nasdaq gained 285.99 points (+1.51%) to end at 19,269.46. US futures are little changed today, while the yield on the US 10-year bond rose to 4.351%.

Asian markets are up today, largely because of the Fed’s rate cut. Japan’s Nikkei index rose by 0.80% in the morning.

Indian market

The Indian market, which had shown some enthusiasm after Trump’s return, took a downturn yesterday. Profit-taking and concerns about various industrial sectors led to second-quarter results that continued to miss expectations. GDP growth for the second quarter is expected to fall below 7%. The Chief Economic Adviser has stated that annual growth may not reach 7%, while the RBI Governor warned that inflation would likely remain high in October, further dampening market sentiment.

The Nifty closed down by 284.70 points (1.16%) at 24,199.35, and the Sensex lost 836.34 points (1.04%) to finish at 79,541.79. The Bank Nifty closed 0.77% lower (down 400.90 points) at 51,916.50. The mid-cap index ended 0.43% lower at 57,109.15, and the small-cap index dropped 0.75% to 18,763.85.

The metal, auto, and realty sectors led the market lower. Hindalco’s shares fell 8.5% after its overseas subsidiary Novelis reported poor second-quarter results and lowered its revenue and profit expectations for the next quarter. Shares of Trent fell 7.5% after it reported a 39% rise in revenue and a 47% jump in net profit for the second quarter, but a 14% decline in profit compared to the previous quarter. Trent is headed by Noel Tata, the head of Tata Trusts. Shares of gold finance companies, Manappuram and Muthoot, fell for the second day in a row, weighed down by lower gold prices. However, a potential rebound in gold prices could help their performance today.

In the news, the Supreme Court ordered the liquidation of the company that had failed to revive Jet Airways, which had earlier promised to fund its revival. Shareholders are likely to receive little to nothing after assets and liabilities are settled and sold. Jet Airways' stock fell 5% to Rs 34.16 yesterday.

Federal Bank shares closed marginally lower after hitting a record high of Rs 207.90. Kitex Garments shares rose 5% yesterday, closing at Rs 651.05.

On Thursday, foreign investors sold a net Rs 4,888.77 crore in the cash market. However, domestic funds and institutions bought shares worth Rs 1,786.70 crore.

The market remains uncertain. Nifty’s support level has now fallen to 24,000. If this fails to hold, the next support level will be around 23,800. For today, Nifty may find support at 24,170 and 24,100, while resistance is expected at 24,420 and 24,495.

Gold update

Gold, which had fallen by 3% on Wednesday, rebounded following Trump’s victory. The primary reason is that the strong rally in the dollar has ended, and the quarter-percent interest rate cut by the US Fed has opened the way for the dollar to weaken and gold to rise. Yesterday, gold gained $47.10 (1.77%) to settle at $2,707.10 an ounce, and this morning, it is at $2,703. Gold prices in Kerala fell by Rs 1,320 to Rs 57,600 yesterday but are expected to rise significantly today.

Silver rose by 2.5%, closing at $31.98 an ounce. UBS analyst Julian Wee suggested that silver prices could reach $50 next year, driven by strong industrial demand.

Currency markets returned to normal after the Fed’s rate cut. The dollar index fell 0.50% to 104.51 on Thursday and is at 104.45 this morning. The rupee weakened yesterday, with the dollar rising by 9 paise to close at a record high of Rs 84.37, but the rupee may strengthen a bit today.

Crude oil prices have risen again, amid fears that the West Asian conflict may intensify. Brent crude rose 1% to settle at $75.63, WTI crude stood at $72.19, and UAE’s Murban crude closed at $74.83.

Cryptocurrencies, which surged after Trump’s victory, continued to climb yesterday. Bitcoin reached a record high of $76,943.12 before falling back to around $76,200. Ether reached $2,920.

Industrial metals rallied as the dollar weakened, helped by lower interest rates. Copper surged by 2.99% to $9,526.94 per tonne, while aluminum rose 3.02% to $2,694.35 per tonne. Tin increased by 0.74%, lead by 1.23%, nickel by 4.12%, and zinc by 3.26%.

Market indicators

• Sensex: 30 79,541.79 -1.04%
• Nifty50: 24,199.35 -1.16%
• Bank Nifty: 51,916.50 -0.77%
• Midcap: 100 57,109.15 -0.43%
• Smallcap: 100 18,763.85 -0.75%
• Dow Jones: 43,729.34 -0.00%
• S&P: 5973.10 +0.74%
• Nasdaq:  19,269.46 +1.51%
• Dollar($):  ₹84.37 +₹0.09
• Dollar index:  104.51 -0.48
• Gold (oz):  $2707.10 +$47.10
• Gold (Pavan):  ₹57,600 -₹1320