Broad Strokes, August 05, 2024

Indian Stock Market Faces Significant Selloff

• The Indian stock market experienced a significant selloff, with the BSE Sensex plunging 2,222.55 points (2.74%) to close at 78,759.40 and the NSE Nifty 50 dropping 662.10 points (2.68%) to 24,055.60.
• This downturn was driven by global recession fears following disappointing U.S. job data and escalating geopolitical tensions in the Middle East.
• The India VIX surged over 60%, indicating heightened market volatility and investor anxiety.
• All sectoral indices ended in the red, with the Nifty Metal and Realty indices suffering the most, down 5% and 4.5%, respectively.
• Analysts suggest that while the near-term outlook remains uncertain, the long-term growth trajectory for India is still positive, advising caution and profit booking in overvalued stocks.

Japan’s Nikkei 225 Index Suffers Historic Plunge

• Japan’s equity markets faced a historic downturn, with the Nikkei 225 index plunging nearly 13% and the Topix index dropping over 20% from recent peaks.
• The sell-off was driven by a surge in the yen following the Bank of Japan’s interest rate hike and concerns over the U.S. economic outlook after disappointing employment data.
• All 33 industry groups on the Topix experienced losses, with significant institutional investor sell-offs exacerbating the situation.
• Analysts noted that the current volatility reflects a mass deleveraging as investors react to deteriorating economic indicators and unwind long positions in crowded trades.

Titan Company Faces 8% Stock Decline

• Titan Company experienced an 8% decline in its stock price, closing at Rs 3,201 per share, following a marginal 1% year-on-year drop in net profit to Rs 770 crore for Q1 FY25.
• The decline was attributed to reduced demand amid rising gold prices and fewer wedding dates.
• Despite this, the company’s revenue from operations rose by 10% to Rs 11,105 crore.
• Analysts remain optimistic about Titan’s growth prospects, with target prices ranging from Rs 3,450 to Rs 4,100.
• Titan plans to expand its jewellery segment with a 15% CAGR target until FY27 and aims to open 180-210 new stores in FY25, particularly focusing on its Mia brand.
• Meanwhile, RailTel’s shares fell 7% after reporting a sequential decline in profits despite a year-on-year increase.

PSU Stocks Face Significant Selloff

• PSU stocks experienced a significant selloff, with major players like Rail Vikas Nigam Ltd (RVNL), Indian Railway Finance Corporation (IRFC), and Mazagon Dock witnessing declines of up to 8%.
• The BSE PSU and CPSE indices fell by nearly 4%, reflecting a broader downturn as the BSE Sensex and Nifty dropped over 2%.
• This market correction was driven by fears of a potential US recession following disappointing job data and geopolitical tensions.
• Analysts caution that while the long-term outlook for India’s economy remains positive, investors should be wary of overvalued segments and consider profit booking in the current environment.
• Retail investors are retreating from PSU stocks, with institutional investors also reducing their stakes, indicating a shift in market sentiment.

SBI Stock Faces Volatility Post Q1 Results

• State Bank of India (SBI) experienced significant stock volatility, with shares dropping 5.2% to Rs 804 following its Q1 FY25 results.
• The results showed a marginal 0.9% increase in net profit to Rs 17,035 crore and a slight decline in net interest margins (NIM) to 3.35%.
• Despite the dip, analysts remain bullish, with target prices ranging from Rs 900 to Rs 1,075, citing strong loan growth of 15.39% year-on-year and stable asset quality.
• SBI’s loan-to-deposit ratio stands at a comfortable 69%, below the sector average.
• While the stock faced short-term pressure, the long-term outlook remains positive due to robust fundamentals and strategic positioning.

MF and Retail Investors Dominate NSE Stocks

• Domestic mutual funds and retail investors significantly increased their shareholding in NSE-listed companies in the quarter ending June 2024.
• Mutual fund shareholding reached a record high of 9.17%, and retail investors’ shareholding rose to 7.64%.
• Foreign portfolio investors (FPIs) saw their holdings drop to a 12-year low of 17.38% due to a net outflow of approximately Rs 7,700 crore.
• The combined ownership of domestic institutional investors (DIIs) rose to 16.23%, narrowing the gap with FPIs to its smallest ever.
• The government’s share as a promoter increased to a seven-year high of 10.64%, while private promoters’ stakes fell to a five-year low of 40.88%.
• This trend indicates a significant institutionalization of the Indian market, with domestic players increasingly counterbalancing the decline in foreign investments.

Global Markets Decline Amid US Recession Fears

• Global markets experienced significant declines amid rising fears of a U.S. recession, triggered by disappointing July employment data.
• The data showed only 114,000 jobs added and an uptick in the unemployment rate to 4.3%.
• Expectations for aggressive interest rate cuts by the Federal Reserve surged, with traders pricing in a nearly 70% chance of a 50 basis point cut at the upcoming September meeting.
• Asian markets were particularly hard hit, with Japan’s Nikkei index plummeting over 12%.
• Bond yields fell sharply, reflecting a flight to safety, while oil prices also dropped due to concerns over demand and geopolitical tensions in the Middle East.
• Analysts are now forecasting a 25% probability of a recession within the next year, prompting discussions about the Fed’s potential need for swift monetary easing.

IPOs Sees Mixed Subscription Trends

• Ola Electric’s IPO, with a price band of Rs 72-76 per share, garnered mixed responses.
• Retail investors subscribed 2.66 times their allotted shares, while overall subscription reached only 0.71 times by Day 2.
• Ola Electric, a leader in India’s electric two-wheeler market, reported a net loss of Rs 1,584 crore for FY24, raising concerns about its profitability.
• In contrast, Ceigall India’s IPO was heavily subscribed at 1.5 times, primarily driven by non-institutional investors.
• Baazar Style Retail secured Rs 37 crore in pre-IPO funding, reducing its fresh issue size ahead of its public offering.
• The contrasting subscription trends highlight varying investor sentiment towards these emerging companies in the Indian market.

Bharti Airtel, Maricom, Tata Power Q1 Results

• Bharti Airtel reported a remarkable Q1 FY25 net profit of Rs 4,160 crore, more than doubling from Rs 1,612 crore year-on-year, driven by exceptional items.
• Revenue rose 2.8% to Rs 38,506 crore, although growth was tempered by currency devaluation in Africa.
• The average revenue per user (ARPU) increased by 5.5% to Rs 211, while EBITDA stood at Rs 19,944 crore with a margin of 51.8%.
• Marico’s Q1 net profit grew 9% to Rs 464 crore, with revenue increasing 6.7% to Rs 2,643 crore, slightly below expectations.
• Tata Power is anticipated to report a 14.7% revenue increase driven by solar and thermal power growth.
• 109 companies, including Bharti Airtel, released their earnings on the same day, reflecting a busy earnings season.