Markets Slip on Sectoral Underperformance

Domestic indices mirrored global weakness, with the IT and banking sectors taking the hardest hit, while FIIs offloaded over ₹ 25,000 crore in cash markets, affecting the overall market sentiment 

Indian benchmark indices, following an impressive 11-session rally in the first half of September 2023 that marked their longest consecutive gains since 2007, subsequently experienced a significant downturn that nearly erased the initial gains. Foreign institutional investors (FIIs) assumed the role of net sellers, offloading more than `25,000 crore in the cash markets throughout the month of September. The market sentiment mirrored the weakness seen in global markets, driven by concerns over high inflation rates and elevated 10-year Treasury yields, which reached multiyear highs. 

Additionally, Brent Crude prices climbed to over USD 97 per barrel, marking their highest level in more than 10 months. Over the past two weeks, FIIs recorded an outflow totalling Rs 17,112.07 crore, while domestic institutional investors (DIIs) made commendable efforts to bolster the market with a substantial inflow of Rs 10,082.22 crore. The BSE Sensex and Nifty 50 ended the fortnight with declines of 2.96 per cent and 2.74 per cent, respectively. Meanwhile, the broader indices, including the BSE Mid-Cap index and BSE Small-Cap index, outperformed the primary benchmarks but still registered losses of 0.51 per cent and 0.70 per cent, respectively. 

Conversely, the primary market was ablaze with activity during the fortnight, featuring the launch of seven mainboard IPOs. The robust trend continued throughout the month, with a total of 14 IPOs, a majority of which garnered a robust response from eager investors. Taking a closer look at the sectoral performance, all sectoral indices registered losses over the fortnight, except for the power sector. The BSE Power index managed to secure a gain of 0.77 per cent, primarily driven by the impressive rally of JSW Energy Ltd.,which single-handedly bolstered the sector.

The shares of JSW Energy soared around 10 per cent on reports of PE investors considering a stake and Jefferies offered an optimistic outlook. The BSE Information Technology index took the hardest hit, plummeting by over 4 per cent. This decline was mainly caused by a sharp drop of nearly 8 per cent in the shares of Wipro, following the surprise exit of the company’s CFO, Jatin Dalal. Heavy selling pressure was also evident in Tech Mahindra and HCL Technologies, with both companies’ shares tumbling 5 per cent each. 

The BSE Bankex also exhibited notable weakness over the last fortnight. HDFC Bank, in particular, experienced a significant decline of over 8 per cent, triggered by a rating downgrade to ‘neutral’ by foreign broking firm Nomura, which occurred after the bank disclosed details regarding the merged entity. In other news, India’s foreign exchange reserves have declined for the third consecutive week and currently stand at a four-month low of USD 590.70 billion, as reported by data from the Reserve Bank of India. India’s current account deficit (CAD) has seen a substantial increase, surging to USD 9.2 billion in Q1FY24, primarily on account of a higher trade deficit.