▼ Nifty: 11,767 (-1.36%) ▼ Sensex: 40,145 (-1.33%)
It is not very difficult to gauge what would happen to the markets if heavyweights such as Reliance Industries (-3.7%), ICICI Bank (-2.7%), HDFC Bank (-1.5%) and Infosys (-0.7%) decline on the same day. Reliance, in particular, was weighed down by the deal with Future Group being put on hold for now. All major indices felt the heat and closed lower, with Nifty Metal (-3.5%) and Nifty Auto (-3.2%) being the worst hit. In all, 39 of the Nifty50 stocks ended in the red, indicating that the selling was broad-based.
Here are the top stories of the day.
Auto stocks witness broad sell-off
Until last week, the markets were upbeat about the auto volumes during the festive season. However, this week started with sharp selling in auto stocks, especially two-wheeler makers such as Hero Moto (-6.6%) and Bajaj Auto (-6.1%). Automakers have been building inventory at dealerships ahead of the festive season in anticipation of robust sales. However, whether or not retail sales will clear the inventories remains to be seen. The picture will be clearer only after the festive season, around mid-November. One could expect the action in auto stocks to continue as large auto companies will declare results this week (Tata Motors on Tuesday, Hero Moto on Wednesday, Maruti and TVS on Thursday). The markets would particularly watch out for the management commentary on the expectation of sales in the festive season and beyond. Further, monthly volume numbers for October will be out starting early next week, which are also likely to move stock prices. Shares of large auto companies that were down today include M&M (-4.6%), Eicher (-3.2%), Tata Motors (-2.4%) and Maruti (-0.6%).
Polycab surges as profitability improves
India’s largest manufacturer of wires and cables reported a 14.8% jump in net profit over Q2 of last year. This spike in profits comes despite a 6% drop in revenues during the same period. The dip in revenue growth was mainly due to a 7% fall in the wires and cables segment, which contributes nearly 85% of the revenues. However, margin improvement was seen across business segments, including wires and cables, fast-moving electrical goods (FMEG) and engineering procurement and construction (EPC). Control over fixed costs, better product pricing and premiumization of FMEG products helped to increase operating margins to 14.8% (versus 12.0% last year). The stock gained 7.4% today in an otherwise weak market.
Tech Mahindra dips on profit booking
In line with what was seen in other IT stocks recently, Tech Mahindra too witnessed profit booking despite better-than-expected results. The stock fell 3.3% today, after having risen nearly 50% since July 2020. The company reported net profit of ₹1,065 crore for Q2, beating the expectation of ₹999 crore. Its revenue grew 2.9% over the last quarter on constant currency terms, which was a tad lower than other IT majors, which grew around 4.0% during the same period. The management emphasised that customers are focusing on digital transformation and that it has seen demand revival across multiple segments.
Closing bell
The markets didn’t find any saviour today as several major stocks saw selling pressure. Further, the India VIX (the measure of market volatility) shot up 4.6% to 22.8 today (up ~17% this month). In the run-up to the US Presidential Election, volatility is expected to rise as the week progresses. In fact, the week’s close could be a nail-biter with Reliance declaring its Q2 results on Friday.