SENSEX Plunges Below 81,000, NIFTY Dips 170 Points Amid Disappointing Q2 Earnings and Global Tensions

Market Overview

The Indian stock market experienced a sharp decline on Friday, October 18, 2024, as weaker-than-expected Q2 earnings reports sent shockwaves through Dalal Street. At the opening bell, the S&P BSE SENSEX fell by 563.57 points, or 0.7%, reaching 80,443.04, while the NSE NIFTY50 index shed 170 points, or 0.71%, to hit 24,574.50.

Across the board, all sectoral indices were in the red, reflecting widespread selling pressure. The market downturn was driven by disappointing financial results, foreign investor selling, and lingering geopolitical concerns, particularly in the Middle East.

Key Factors Driving Market Downturn

1. Disappointing Q2 Earnings

The primary driver behind the market’s poor performance was the lackluster Q2 earnings from several prominent companies. Firms like Bajaj Auto, Nestle India, and Tata Chemicals failed to meet market expectations. Though Infosys delivered solid results, the absence of any positive surprises dampened investor sentiment.

Wipro, which reported a stronger-than-expected set of numbers, was one of the few bright spots, with its shares rising by nearly 5% to ₹554.40. Despite this, the overall corporate earnings season has been underwhelming, contributing to the widespread sell-off.

2. Relentless Foreign Investor Selling

Foreign institutional investors (FIIs) have been net sellers, offloading equities worth ₹7,421.40 crore on Thursday. In contrast, domestic institutional investors (DIIs) net purchased ₹4,979.83 crore worth of shares. The persistent outflows from FIIs have put additional pressure on Indian equities, further exacerbating the downturn.

3. Global Market Influence

Global markets also weighed on investor sentiment. Asian markets traded mixed, with Japan’s Nikkei rising on the back of a weaker yen, while other major indices struggled. Wall Street’s performance on Thursday was similarly subdued, as the S&P 500 and Nasdaq barely held onto their gains. This uncertainty has bled into Indian markets, creating a risk-averse atmosphere for investors.

4. Geopolitical Tensions

Another major factor unsettling the markets is the geopolitical tension in the Middle East. Concerns about rising oil prices and instability in the region are adding to global market volatility. Oil futures edged higher on Friday, following a surprise drop in U.S. oil inventories and ongoing concerns about supply disruptions.

Sectoral Breakdown

1. IT Sector Takes a Hit

The BSE IT index was among the hardest-hit sectors, declining by 1% to 42,734.53. Major contributors to the loss included tech giants like Infosys, LTIMindtree, Tech Mahindra, and Coforge. Despite Infosys’s relatively stable performance, overall investor sentiment in the tech sector remains weak, partly due to concerns over global IT spending and currency fluctuations.

2. Broader Market Struggles

MidCap and SmallCap indices did not fare much better. The BSE MidCap index was down 284.84 points, or 0.60%, while the SmallCap index fell by 1.05% to 55,994.23. The more domestically focused companies in these indices underperformed the benchmark, reflecting concerns about domestic economic growth and fiscal deficit worries.

Stock-Specific Highlights

1. Manappuram Finance Slumps

Shares of Manappuram Finance took a significant hit, falling 15% after the Reserve Bank of India (RBI) barred its subsidiary Asirvad Micro Finance from sanctioning and disbursing loans. The news sent shockwaves through the financial sector, particularly affecting microfinance stocks.

2. Tejas Networks Surges

In contrast to the broader market trend, Tejas Networks’ stock gained over 7%, trading at ₹1,204 apiece. The surge came ahead of its Q2 earnings report, signaling positive investor expectations for the telecom equipment maker.

Global Market Cues

Global markets provided mixed signals on Friday. In Asia, Japan’s Nikkei rallied, while other indices such as South Korea’s Kospi and Hong Kong’s Hang Seng traded lower. Meanwhile, the U.S. dollar index remained steady at 103.78, reflecting global uncertainty and rising geopolitical risks.

On Wall Street, the Dow Jones Industrial Average recorded another all-time high on Thursday, while the S&P 500 and Nasdaq remained flat. Investors are parsing through mixed economic reports and a flurry of Q2 earnings to assess the overall health of the global economy.

Crude Oil and Inflation Concerns

Crude oil futures rose marginally, driven by a drop in U.S. inventories and fears of supply disruptions due to the conflict in the Middle East. Rising oil prices could further stoke inflation concerns globally, a factor that central banks and investors are closely monitoring.

Outlook for the Indian Market

Looking ahead, market experts are cautious. Anshul Jain, Head of Research at Lakshmishree Investment and Securities, believes that the market is grappling with multiple headwinds, including global uncertainty, geopolitical tensions, and disappointing corporate earnings. “The NIFTY 50 index has broken crucial support at 24,700. Investors should be cautious as the market may test further lows if these pressures continue,” he added.

Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, also noted that the combination of weak Q2 results and ongoing foreign investor selling is unlikely to ease in the near term. “We expect a range-bound market in the short term, with potential downside risks if global and domestic uncertainties are not resolved,” Khemka said.

 

The Indian stock market is currently in a challenging phase, with negative corporate earnings and external geopolitical risks driving widespread selling. As FIIs continue to sell, DIIs may need to step in more aggressively to stabilize the market. Investors are advised to tread carefully in this volatile environment, as both domestic and international factors contribute to the uncertainty.