Dampener

Nifty50: 17,542 ▼ 216 (-1.2%)
Sensex: 58,766 ▼ 770 (-1.2%)

Hey, there!

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• After a gap-down opening, benchmark indices closed in the red amid weak global cues.
• In all, 38 of the Nifty50 stocks closed lower. 
• The rupee closed 10 paise lower at 79.55 as compared to Tuesday’s close of 79.45.

Among the Nifty sectoral indices, Realty (+1.8%) and PSU Bank (+0.7%) saw most gains, while IT (-1.9%) and Oil and Gas (-1.8%) were the top losers.

What’s trending

⭐ Two-wheeler sales zoom ahead

BAJAJ-AUTO (NSE): 4,075 ▼ 9.3 (-0.2%), EICHERMOT (NSE): 3,414 ▲ 55 (+1.6%)

Two-wheeler makers reported robust sales numbers in August. TVS Motors’ total two-wheelers sales grew by 15% year-on-year (YoY) to 315,539 units. Meanwhile, sales of Bajaj Auto grew by 5% to 3,55,625, owing to a sharp 48% rise in domestic sales. Royal Enfield maker, Eicher Motors, reported a 53% YoY increase in sales to 70,112 units.

⭐ Havells in expansion mode

HAVELLS (NSE): 1,381 ▼ 9.6 (-0.6%)

Havells India plans to invest ₹130 crore in its Ghiloth plant in Rajasthan to boost its washing machine production capacity by 3.8 lakh units per annum. The proposed capacity expansion will be completed by June 2023 and will be financed through internal accruals. The company is also setting up a cable-manufacturing unit in Karnataka with an estimated investment of ₹300 crore.

⭐ Ashok Leyland bags large order

ASHOKLEY (NSE): 161 ▲ 7.9 (+5.1%)

Ashok Leyland has secured orders for 1,400 school buses in the UAE. Although the value of the order was not disclosed, the company said this is the company's largest ever order for school buses in the UAE. Most of the buses will be supplied to Emirates Transport and STS Group.

⭐ Spicejet faces turbulence

SPICEJET (NSE): 45 ▼ 1.1 (-2.4%)

Domestic carrier Spicejet’s net loss widened to ₹789 crore in Q1FY23 from ₹729 crore in the year-ago period. The business was affected by high fuel prices and a falling rupee. However, revenue from operations jumped by 48% to ₹2,478 crore. Amid the widening net loss and increasing in-flight incidents, the company’s chief financial officer also resigned on Wednesday. 

⭐ Goldman Sachs cuts India’s growth forecast

Goldman Sachs has lowered its growth projections for the country after the Q1 GDP growth missed street estimates. The growth rate is lower than the Reserve Bank of India's forecast of 16.2%. Goldman Sachs has cut the full-year 2022 GDP growth forecast to 7% from 7.6% and has also lowered the FY23 estimates by 0.2% from 7.2%.

In Focus

IT stocks feel the heat

Indian IT stocks seem to be out of favour among Indian investors this year. The Nifty IT index has fallen by over 30% year-to-date, while the top 5 IT stocks are down in the range of 17 to 42%. One might think a steep decline in Indian rupee against dollar in 2022 would be beneficial for the software exporters. Despite this, why are IT stocks under pressure? Let's explore.

One of the key factors for the correction in IT stocks are the changing macroeconomic factors in Western countries. A series of interest rate hikes undertaken by the US Fed and other major economies to curb rising inflation might lead to a slowdown in growth. As a result, organisations may trim their technology budgets to protect profitability.

This cut in the IT budget might reduce the deal pipeline for Indian firms in the future and impact their revenue and profitability. IT firms in India have a huge dependency on the US and European markets, which contribute a lion’s share to their revenue. 

Besides this, domestic factors like high attrition rates are also putting pressure on IT companies' profitability. In the June quarter, the attrition rate at the top 5 tech firms was in the range of 19 to 28%, a consistently high attrition rate leads to frequent rehiring and adds to expense to train new employees and puts margin pressure on tech firms.

Hence, subdued global sentiments coupled with high attrition rate have put investors, including foreign institutional investors (FIIs), in a cautious mode towards IT companies.

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Good to know

What is trade deficit?

A trade deficit is a situation in which a country’s imports surpass its exports. It is also referred to as a negative balance of trade. A country with a trade deficit has spent more money than it has made in international trade with the rest of the world. A trade deficit has an impact on production, jobs, national security and how the deficits are financed.

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