Heavy selling in a couple of heavyweight counters, including Infosys, HDFC and HDFC Bank, sent the Sensex crashing on Monday, with the bellwether losing 1,172 points or 2.01% to close at 57,166.74. The broader Nifty fell below the 17,200-level to end the session at 17,173.65, a fall of 1.73% . The equity markets have been on a losing streak for the past four sessions driven down by weak global cues, higher inflation and the resurgence in Covid-19 cases in some countries. The continuing Russia-Ukraine conflict, which has resulted in crude oil prices moving back up to the $112/barrel mark, also weighed on the sentiment. With Monday’s fall, the Sensex has come off by about 6% over the last two weeks.
Bond yields rose to 7.263% intra-day on Monday but gave up gains to close at 7.152%. The rupee slipped to 76.41 against the dollar in intra-day trade, in sync with the strength of the US currency but recovered to `76.2688 by close.
Foreign portfolio investors (FPI), who have been sellers in virtually every session in April so far, continued to take risk off the table; provisional data from the exchanges showed they sold stocks worth approximately $837 million on Monday, while domestic institutional investors bought shares worth $438 million. FPIs have pulled out $13.5 billion from the equity market between January and March and have pulled out $2.3 billion in the last seven sessions.
Both Infosys and HDFC Bank were big losers, giving up 7.27% and 4.74% respectively, following disappointing Q4FY22 results. The IT major missed revenue and profit estimates and reported a steep 200 basis points sequential fall in Ebit margins to 21.5%.
Analysts said HDFC Bank’s operating performance was weak as the net interest income grew just 10% y-o-y, while the non-interest income was weighed down by weak treasury income. “The overhang of the merger and lack of differentiation in underwriting or return ratios post-Covid are weighing heavily on the valuation multiple even if the earnings trajectory is quite healthy,” analysts at Kotak Institutional Equities wrote.
Though TCS reported a reasonably good set of numbers for the March quarter, analysts remain anxious about the pressure on operating margins of IT players and the high level of attrition which could push up salary bills. The Street is also concerned that rising retail inflation in India could curb demand for goods and services and hurt profits of consumer-facing companies. Already, high prices of commodities are eating into profit margins while supply shortages of some key inputs are hitting production. The CPI inflation for March rose 6.95% leading to a jump in yields and concern the central bank would soon begin a series of policy rate hikes.
