Market Recap for 15th October

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 Nifty: 11,222 (-0.05%)     Sensex: 39,728 (-2.61%)

After the initial cheer led by the strong Q2 result of Infosys, the Indian markets succumbed to broad-based selling. Profit booking in IT stocks led the markets down in the first half, and as the day progressed, selling in banking shares hammered the indices further. A steep fall in index heavyweights Reliance Industries (-3.6%), HDFC Bank (-3.5%) and Infosys (-2%) was enough to demolish any hopes of an intraday revival in the markets. In all, 47 of the Nifty50 stocks ended in the negative, indicating an extremely weak investor sentiment.

Here are the top stories of the day.

IT stocks tumble after Infy Q2 results

The Q2 results of Infosys, India’s second-largest IT services provider, beat street expectations with a sequential revenue growth of 4.0% on constant currency terms. The management also revised the FY21 revenue growth outlook upward to 2–3% (compared to 0–2% earlier). What’s more, the stock even touched a new lifetime-high in the morning but then, ironically, lost all the gains made this week. It seems investors chose to book profits in the stock, which has gained nearly 50% since the start of Q2. Profit booking was also seen in other large-cap IT stocks such as TCS (-2.6%) and Wipro (-2.5%), and midcaps like Mindtree (-7.3%) and Coforge (-4%).  

Investors seeking safety in FMCG stocks

Today, while the Nifty50 index fell by 2.43%, the Nifty FMCG index fared relatively better and fell by only 1%. Among individual stocks, Dabur ended flat, while the selling intensity was significantly lower in Marico (-0.1%), HUL (-0.6%) and Nestle (-0.6%). The recent Q2 update from Marico indicates a partial revival in the consumer sentiment. The company mentioned that the rural market continued to perform better than the urban market, likely supported by government relief packages, a relatively lower impact of the pandemic, and strength in the agricultural sector. As restrictions are relaxed in most areas, the distribution network has bounced back to near pre-Covid levels. Other FMCG companies and packaged food companies also saw similar improvements in their core categories, with the increase in stay-at-home consumption.  

Rane Brake Lining surges on strong results & buyback

Auto components manufacturer, Rane Brake Lining has reported a 54.7% YoY growth in net profit in Q2, owing to improved operating margins and a one-time price hike. The company has also declared a buyback at ₹825, over 20% higher than the current market price. The stock rose 6.3% today on these favourable developments. Further, the company, in its earnings release, mentioned that it saw a pickup in demand, and OEM production levels have gained momentum anticipating festive sales. Further, the company is also cautiously optimistic about sustenance of the demand after the festive season. This is significant for the auto sector, given that the company supplies its products to most major auto manufacturers, across the two-wheeler, passenger car and commercial vehicle segments.

Closing bell

The markets witnessed a decisive downward movement today, and there are several indicators suggesting that investors are wary. For one, all sectoral indices closed in the red, while the India VIX was up 9%. Further, mutual fund net inflows have been negative over the past three months, and inflation numbers are higher than expectations. Mix all these ingredients and you get a perfect recipe for ‘caution’.