Stock market: Hopes rise in the morning, fall flat in the afternoon

The initial rally in IT stocks, which powered the stock market indices upward in the morning, was quickly offset by a sharp downturn in the financial pack, resulting in a flat close for both the Nifty 50 and Sensex.

The Nifty 50 ended the session with a 0.15% drop at 24,436 points, while the Sensex ended Wednesday's trade with a cut of 0.16% at ₹80,090 points. Some 32 constituents of the Nifty 50 closed in the negative territory, led by Mahindra & Mahindra, which experienced a decline of 3.2%.

Other notable laggards included Sun Pharmaceutical, Eicher Motors, Shriram Finance, Power Grid Corporation, Larsen & Toubro, Adani Ports & SEZ, NTPC, and Cipla, all of which recorded losses exceeding 1.5%.

It appears that investors are seizing the opportunity to book profits on every price rise, a trend that has been evident over the past few trading sessions.

Factors weighing on the market

Expensive valuations, muted earnings reported by major companies for the September-ending quarter, ongoing selling pressure from foreign portfolio investors (FPIs), rising tensions in the Middle East, and uncertainty surrounding the upcoming U.S. elections are some of the key factors currently weighing on the market.

Companies that reported earnings below estimates are experiencing significant selloffs in their shares, while those that exceeded street expectations are witnessing their stock prices reach fresh record highs.

Despite the pressure on largecap stocks, midcap and smallcaps quickly rebounded in today’s session following a sharp decline in the previous trading day. The Nifty Midcap 100 index closed the session with a gain of 0.64%, settling at 56,533 points, while the Nifty Smallcap 100 index finished with a rally of 1.24%, reaching 18,285 points.

Commenting on today's market performance, Vinod Nair of Geojit Financial Services said, “The investor mindset turned gloomy with the tepid earnings and a knee-jerk reaction from FIIs, which dragged the market sentiment. However, midcaps and smallcaps are experiencing bargain hunting following the recent decline, though the sustainability of this momentum-driven buying remains uncertain.”

Sectorwise performance 

Among sectoral indices, the Nifty IT saw a significant recovery in today’s session, rising by 2.38%. This uptick was driven by a sharp increase in the shares of Coforge and Persistent Systems, both of which reported better-than-expected earnings for the September quarter.

Both shares hit fresh highs during the trading day, ending with gains exceeding 10%. Other sectoral indices, including Nifty PSU Bank, Nifty Media, and Nifty FMCG, recorded gains of up to 0.15%.

Conversely, the Pharma sector continues to face challenges, with the Nifty Pharma index declining by 1.56% to 22,471 points, marking its third consecutive day of losses.

Today's drop has brought the index down to a two-month low. Similarly, the Nifty Auto index extended its downward trend for the second day, falling 0.71% to reach a near three-month low.

Goldman Sachs downgrades Indian stocks 

Goldman Sachs Group downgraded Indian equities to 'neutral' from 'overweight,' citing slowing economic growth that is impacting the outlook for corporate earnings, Bloomberg reported.

The group raised Indian stocks to 'overweight' late last year, highlighting earnings growth over two years despite global macroeconomic headwinds. However, the weak earnings reported by companies so far for the September quarter have made them more cautious about Indian stocks.

The analysts expressed concerns about high valuations and noted that a less supportive backdrop could limit the near-term upside for local shares.

Goldman Sachs analysts lowered their 12-month target for the Nifty 50 Index to 27,000 from 27,500 previously, implying a 10% upside from Tuesday’s close.

(By arrangement with livemint.com)