Benchmark indices Nifty and Sensex surged, buoyed by HDFC Bank's steady third-quarter earnings, which helped lift market sentiment. However, losses in energy, metal, and PSU bank stocks tempered the overall optimism. The IT index, one of the day's standout performers, extended its gains late in the session, providing additional support to the market's recovery.
However, the mid- and small-cap indices witnessed a bloodbath, slipping by 1.3 percent and 1.1 percent, respectively, and underperforming the benchmark indices. Experts caution that valuations in this segment remain above historical averages, suggesting the potential for further corrections. They recommend a stock-specific strategy centered on robust fundamentals and clear earnings visibility, rather than counting on a broad-based recovery. Mid-cap and small-cap indices failed to surpass their 20-day exponential moving average (EMA), facing resistance and renewed selling pressure.
At close, the Sensex was up 566.63 points or 0.75 percent at 76,404.99, and the Nifty was up 130.70 points or 0.57 percent at 23,155.35. About 1,110 shares advanced, 2,677 shares declined, and 107 shares unchanged
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HDFC Bank shares gained over a 1 percent in the afternoon after it reported a 2.2 percent year-on-year increase in net profit for Q3, reaching Rs 16,736 crore, slightly exceeding Moneycontrol's estimate of Rs 16,650 crore. Net interest income (NII) rose 8 percent YoY to Rs 30,690 crore, aligning with expectations. However, asset quality saw some deterioration, with gross non-performing assets (NPAs) rising to Rs 36,019 crore from Rs 31,012 crore a year ago, and net NPAs increasing to Rs 11,588 crore from Rs 7,664 crore.
"Relentless selling by the FPI, a slowdown in the economy and miss in the corporate earnings are the key points concerns clouding the Indian investors," Jaykrishna Gandhi, Head of Emkay Global Financial Services, said. "Our headline indices are back to new lows, and the broader markets are to follow suit soon. The emerging markets have hardly generated returns over a decade vis a vis the US market in USD terms, any incremental flows or lower selling in the emerging markets could be confirmed only once the dollar weakens.
Also read: MC Market Poll: Majority of experts believe markets could fall another 10% before bottoming out
He added that technically there is strong support at 22,800 and 21,800. The index has corrected around 12 percent, however many stocks are down 30 percent from their peaks. The market should stabilize in the coming month and key announcements in budget and dollar weakening may act as a trigger for an upmove.
The market saw a sectoral divergence as IT emerged as one of the best performers, supported by strong Q3 results and insulation from Trump’s protectionist tariff policies. Infosys, TCS, HCL Tech, Tech Mahindra, and Wipro led the gains, while attention turned to Coforge and Persistent Systems, both set to announce their Q3 earnings today. Pharma shares garnered momentum to close 0.7 percent higher. Nifty Bank also closed higher led by India's largest private lender -- HDFC Bank.
On the downside, Nifty Metal and PSU Bank indices dropped over 1 percent each, weighed down by losses in public sector banks such as SBI, Canara Bank, and Punjab National Bank. Nifty Realty continued to face intense selling pressure, plunging 5 percent for the second consecutive session. Meanwhile, Nifty Energy, Infra, and Auto indices also fell, shedding up to 1.5 percent.
Read more: Small, midcap indices decline up to 9% in 2025: Key factors behind sustained selling pressure
Shares of India Cements plunged over 8 percent weighed down by disappointing December quarter (Q3FY25) results that highlighted the company's deepening financial woes. The cement manufacturer’s net loss ballooned multi-fold YoY to Rs 428 crore in Q3FY25, compared to a modest Rs 16 crore loss in the same quarter last year. Adding to the financial strain was an exceptional loss of Rs 190 crore in the quarter ended December 31, 2024.
Shares of ICICI Prudential Life Insurance sank over 6 percent in the morning session on January 22, after the insurance player saw a miss on margins in the October-December period (Q3) of the current financial year (FY25). While the firm's net profit surged 43 percent to Rs 326 crore, compared to Rs 227 crore reported during the same quarter in the previous financial year, its VNB (value of new businesses) margins were lower than expectations.
Shares of Tata Technologies fell nearly 3 percent and hit their lowest level in 52 weeks after the company released a weak set of quarterly numbers. The company reported a slight decline in net profit for the December quarter at Rs 169 crore, lower than the Rs 170 crore clocked in the same period last year. However, this reflects a sequential growth of around 7 percent from the Rs 157 crore recorded in Q2FY25.
"Given the severity of yesterday's sell-off, the ongoing weakness is likely to persist, with the support from the falling wedge pattern appearing fragile around 22,900. Should this level break, the next support zone would be seen at 22,800–22,700," says Sameet Chawan, Head of Technical and Derivative Research at Angel One. "On the upside, resistance levels continue to shift lower, with the previous support at 23200 now acting as the immediate hurdle, while 23400 remains a stiff barrier. Moving forward, elevated volatility is expected, and market participants should remain cautious, closely monitoring global events while avoiding complacent positions," he added.
Wipro, TCS, Infosys, Tech Mahindra, and Sun Pharma were the top gainers on the Nifty. Laggards included BEL, Tata Motors, Trent, Axis Bank, and Power Grid Corp.
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