Mid-day Mood | Benchmarks retreat ahead of Fed decision; banks, L&T top drags

A total of 1,871 stocks advanced, 1,532 declined and 159 counters remained unchanged on the BSE

Equity benchmarks were on the backfoot in the afternoon session on November 1 as investors remained on the sidelines ahead of the US Federal Reserve’s policy decision later in the day, while lacklustre macroeconomic data added to the pressure.

Cost pressure and muted demand for certain products drove India’s manufacturing activity to an eight-month low of 55.5 in October as against an S&P Global Purchasing Managers’ Index (PMI) of 57.5 a month back, data released on November 1 showed.

Growth eased in October due to competitive pressure and weak demand at some plants. Though there was further increase in new orders, the rate of expansion was the softest in a year, with consumer goods especially affected.

At 12.01 pm, the 30-pack BSE Sensex was trading 112.50 points, or 0.18 percent, lower at 63,762.43, while the broader NSE Nifty dropped 29.70 points or 0.16 percent to 19,049.90.

A total of 1,871 stocks advanced, 1,532 declined and 159 counters remained unchanged on the BSE.

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Sector-wise, metal, banks, commodities, industrials, utilities, power and capital goods were trading in the red, while realty, telecom, energy and IT mustered gains.

The BSE mid-cap index slipped 0.10 percent but the small-cap gauge inched up 0.34 percent.

Continuing their selling spree, foreign institutional investors (FIIs) offloaded Indian shares worth a net Rs 696.02 crore on October 31, while DIIs bought to the tune of Rs 340.25 crore.

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L&T was among the major losers in the Sensex pack, tumbling 1.30 percent, as it succumbed to profit-booking after strong Q2 results.

The engineering major posted a 45 percent jump in net profit for the second quarter of fiscal year 2023-24 to Rs 3,223 crore, while consolidated revenues climbed 19 percent to Rs 51,024 crore from Rs 42,763 crore a year back.

Analysts raised the target prices and estimates for L&T following the results.

Prabhudas Lilladher analysts gave the group a 'buy' rating with a revised target price of Rs 3,437 (from Rs 3,302 earlier). They said L&T was well-placed to benefit in the long run due to strong tender prospects, better order conversion in domestic market, significant traction in hydrocarbon and renewable energy orders from international markets like Saudi Arabia along with an expected uptick in private capex in domestic market.

On similar lines, Bharti Airtel slipped 1 percent even as the telecom giant’s Q2 FY24 financial results left brokerage analysts impressed with subscriber growth and India mobile services performance. Revenue and EBITDA grew more than expected (year-on-year), while net profit fell mainly due to exceptional items.

Bharti Airtel’s fiscal second quarter revenue grew 7 percent on-year to Rs 37,044 crore,  with a 10 percent on-year growth in India business to Rs 26,995 crore. Earnings before interest, taxes and depreciation and amortisation grew to Rs 19,665 crore. EBITDA margin for the period expanded 176 basis point on-year to 53.1 percent. Net profit for the quarter fell 37.5 percent on-year to Rs 1,341 crore.

Banking stocks were the other prominent laggards, with Axis Bank, Kotak Mahindra Bank, HDFC Bank, ICICI Bank and IndusInd Bank dropping as much as 1.06 percent.

In contrast, market heavyweight Reliance Industries topped the gainers’ list, jumping over 1 percent, followed by M&M, SBI, Bajaj Finance, Sun Pharma and Wipro.

Tata Consumer was among the top gainers on Nifty50 after the FMCG player reported a consolidated net profit of Rs 359.18 crore for the quarter ended September, beating the street’s expectations as price hikes boosted margins.

Morgan Stanley maintained its ‘overweight’ call on Tata Consumer stock, with a target price of Rs 933 apiece, as the results were better than its estimates. This is a 3.7 percent upside from the previous closing price of Rs 900.

On the global front, Asian markets were mixed as investors awaited the US Fed’s policy decision, while the yen slumped to one-year lows against the dollar, raising the possibility of an intervention by Tokyo.

The Federal Reserve is widely expected to maintain status quo on policy rates, but the focus will be on signals that come from Chair Jerome Powell and the rest of the Federal Open Market Committee.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.13 percent, starting November in a sombre mood after clocking three straight months of losses. Japan's Nikkei rose 2 percent.

China shares dropped 0.15 percent after its factory activity unexpectedly contracted in October, adding to a downbeat official manufacturing survey the previous day and raising questions over the country's fragile economic recovery at the start of the fourth quarter.

The yen tumbled after the Bank of Japan decided to tweak its bond yield control policy again on Tuesday, further loosening its grip on long-term interest rates.

US Treasury yields remained elevated, with the yield on 10-year Treasury notes up 5.4 basis points at 4.929%. The yield on the 30-year Treasury bond was up 6.6 basis points to 5.090 percent.

"With the ground war in Gaza intensifying, the uncertainty surrounding the West Asian crisis is at its peak. Now we don’t know how and when this war will end and what the consequences will be. Therefore, investors should continue with a cautious strategy,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“It is important to understand that equity markets globally are being impacted more by the spike in US bond yields rather than the Israel-Hamas conflict. The US 10-year bond yield above 4.9% will continue to be a major headwind for stock markets, particularly for those in emerging markets. Sustained selling by FIIs is likely to continue weighing on markets. The crash in Brent crude to $85 is a big positive for India. Aviation, paints and tyre stocks will respond positively to this news,” he added.

Investors may watch the trends in high quality large caps like Maruti, ICICI Bank, HDFC Bank, RIL, ITC and L&T, which have come out with good Q2 results. These companies have good earnings visibility and, therefore, will witness substantial institutional buying when normalcy returns, Vijayakumar further said.