Reliance, Bajaj stocks nudge indices into red; inflation causes worry

Losses in shares of select heavyweights, including Reliance Industries, Bajaj Finance, and Bajaj Auto, dragged Indian stock market benchmarks—the Sensex and the Nifty 50—into negative territory on Tuesday, even as midcap and smallcap segments of the market ended with gains.

Weak global cues, unimpressive Q2 earnings, and concerns over sticky inflation also weighed on market sentiment. However, a sharp fall in crude oil prices offered some comfort and capped the losses for the market.

There were no clear cues from global peers. European markets and US futures traded mixed, while oil prices crashed after reports that Israel will not strike Iranian energy targets. Crude benchmark Brent Crude crashed over 5 percent to the level near $73 per barrel.

The domestic market lacks new catalysts to sustain its gains, and the lacklustre September quarter earnings raise concerns that the Indian market's stretched valuations may be unsustainable.

The market needs good earnings to sustain its valuations. As earnings are a key driver of a company's intrinsic value, earnings growth justifies higher prices and keeps valuation metrics like the P/E (price-to-earnings) ratio in check, supporting investor confidence. Without solid earnings, valuations become difficult to justify, and stock prices are at risk of a downturn.

Inflation threat looming

Meanwhile, the spectre of inflation has come back to haunt investors. India's retail inflation rose to a nine-month high in September due to higher food prices. Government data on Monday showed annual retail inflation, based on the all-India Consumer Price Index (CPI), rose to 5.49 percent in September, higher than 3.65 percent in August. This is the highest retail inflation rate since December 2023, when it was 5.69 percent.

The Sensex slipped 153 points, or 0.19 percent, to 81,820.12, while the Nifty 50 closed 71 points, or 0.28 percent, lower at 25,057.35.

Shares of Reliance Industries ended as the top drag on the Sensex and the Nifty 50. The stock ended 2.06 percent lower after it reported a fall in its net profit for Q2FY25.

Among the sectoral indices on the NSE, Nifty Metal fell 1.44 percent, followed by Nifty Auto which declined 0.83 percent. On the other hand, the realty index jumped 2.05 percent.

The Nifty Bank index closed with a mild gain of 0.17 percent, while the PSU Bank and Private Bank indices fell 0.21 percent and 0.06 percent, respectively.

While the benchmark indices ended lower, the midcap and smallcap segments bucked the trend. The BSE Midcap index rose 0.25 percent, while the BSE Smallcap index witnessed a smart gain of 1.05 percent.

Thanks to gains in the midcaps and smallcaps, the overall market capitalisation (m-cap) of BSE-listed firms inched up to nearly ₹463.9 lakh crore from about ₹463.6 lakh crore in the previous session.

Meanwhile, as many as 258 stocks, including Infosys, HCL Tech, Tech Mahindra, Persistent Systems, Divi's Labs, and HDFC Asset Management Company, hit their fresh 52-week highs in intraday trade on the BSE.

Mixed global trends

According to Vinod Nair of  Geojit Financial Services, the Indian stock market fell due to a mixed global trend and partial profit booking. Mr Nair underscored although declining crude prices are beneficial for the domestic economy, they signal weakening global demand.

Mr Nair said India’s CPI surged due to food prices, which will delay expected rate cuts. Furthermore, subdued corporate Q2 results are leading to a cautious stance.

On the technical front, Shrikant Chouhanof Kotak Securities underscored that on the daily charts, the Nifty 50 formed a bearish candle, which indicates temporary weakness.

"We are of the view that the short-term market texture is non-directional, and rangebound activity is likely to continue in the near future. For the day traders now, 25,000/81,500 would be the immediate support zone. Above this, we could see one quick pullback rally until 25,200-25,250/82,300-82,500. On the flip side, below 25,000/81,500, the market could retest the level of 24,920-24,900/81,000-80,700," said Mr Chouhan.

(By arrangement with livemint.com)