Earnings dent sentiment; Sensex, Nifty down 3.8% for week

Indian market witnessed an eigth consecutive day of fall on Friday. For the week, the S&P BSE Sensex plunged 3.8 percent while Nifty50 fell 3.7 percent in the same period.

In terms of market capitalisation, investors lost nearly Rs 5 lakh crore during this week. The average market-capitalisation of BSE-listed companies fell from Rs 151.62 lakh crore on May 3 to Rs 146.51 lakh crore on May 10.

The final tally on D-Street for Friday – the S&P BSE Sensex fell 95 points to close at 37,462 while the Nifty50 closed 22 points lower at 11,278.

In terms of sectors, NiftyBank plunged by about 3 percent for the week ended May 10. The Nifty Metal index dropped 6.3 percent followed by the Energy Sector which was down 5.9 percent, and Nifty Auto, Nifty Pharma, and Nifty Infra were all down by about 3 percent each.

Trade tensions between the two nations i.e. US and China fuelled volatility in global markets and the rub-off effect was seen on Indian market as well.

Apart from weak global cues, experts are of the view that weak earnings from Indian Inc. also led to some bit of nervousness on D-Street.

“The recent correction got aggravated post Q4 numbers from India Inc. In the last 10 days, we saw more earnings downgrades than upgrades. Almost 21 Nifty companies which have declared their numbers which constitute about 60% of profits suggest that FY19 EPS will be modest around 6% compared to expectations of 10%,” Shailendra Kumar, Chief Investment Officer at Narnolia Financial Advisors told .

“The commentary we have seen from the management suggests that Q1 and Q2 will also remain soft. There is a chance of earnings downgrade in FY20 as well. Whenever EPS gets downgraded the price will fall to adjust the multiple to the same level when the earning season was started,” he explains.

Stocks in news:

State Bank of India (SBI) reported a net profit of Rs 838.4 crore for the quarter ended March 31, 2019, on the back of higher provisions. The bank had reported a loss of Rs 7,718 crore in a year ago period. The stock rose nearly 3%.

The share price of steel major Tata Steel was down 6 percent after sources told Reuters that Thyssenkrupp is expecting the joint venture with Tata Steel to fail.

The share price of Delta Corp ended nearly 7 percent lower after news report emerged that DG GST Intelligence has booked two Goa companies, including Delta Corp, for Rs 6,189 crore evasion.

HCL Technologies: Shares of IT major lost by about 4% and slipped below its 50-DMA as FY20 margin guidance was cut by 100 bps. The company sees the operating margin at 18.50 – 19.50 percent in constant currency (CC) terms for the current financial year. However, most of the global brokerage firms remain fairly upbeat.

Most brokerage firms maintained their rating on Asian Paints post its March quarter results but slashed target prices as margins took a hit. The stock fell by over 1% on the BSE.

Global Markets:

Stocks in Asia rallied on Friday after the US carried out its threat and raised tariffs on Chinese goods. The Shanghai composite closed 3.1 percent to about 2,939.21.

The Nikkei 225 fell 0.27 percent to close at 21,344.92. The Kospi was 0.29 percent higher to close at 2,108.04, while the ASX 200 in Australia finished 0.25 percent higher at 6,310.90.

European markets were trading higher on Friday morning despite the US hiking duties on USD 200 billion worth of Chinese products. Pan-European STOXX 600 climbed 0.9 percent with the French CAC 40 and German DAX indexes rising 1 percent each.