Sensex, Nifty in red as Q2 earnings dampen Diwali spirit; Adani stocks gain

The NSE Nifty 50 dropped 0.24% to 24,411.9 points, while the BSE Sensex declined 0.28% to 80,142.11 by 9:57 am. Seven out of the 13 major sectors showed losses, while small-cap and mid-cap indices performed better, rising 1% and 0.5%, respectively. 

In Short

• Benchmark indices open lower as Q2 earnings miss expectations
• Nifty, Sensex decline 7% from September record highs
• FII outflows ease; domestic buying could support near term

Benchmark stock market indices opened in the red on Wednesday as Q2FY25 earnings fell short of investor expectations, dampening Diwali market cheer amid continued foreign selling pressure.

The NSE Nifty 50 dropped 0.24% to 24,411.9 points, while the BSE Sensex declined 0.28% to 80,142.11 by 9:57 am. Seven out of the 13 major sectors showed losses, while small-cap and mid-cap indices performed better, rising 1% and 0.5%, respectively.

Pharma stock Cipla dropped 3.6%, extending its recent losses following broker downgrades. Despite beating quarterly profit estimates, concerns over delays in US drug launches and higher costs have led analysts to lower earnings projections for the next two fiscal years.

Meanwhile, Maruti Suzuki India rebounded by 1.75% after a sharp 3.8% decline the previous day, driven by positive festive season sales data, which reported a 14% year-on-year increase.

The Nifty50 and Sensex have fallen nearly 7% from record highs reached on September 27, impacted by foreign outflows persisting for 22 consecutive sessions and a largely muted earnings season.

With a 5.5% decline in October, Nifty is set for its weakest month since March 2020, when pandemic fears shook markets globally. Analysts anticipate increased volatility ahead of US non-farm payrolls data on Friday and the US presidential elections on November 5.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “In the near term the market will be influenced by two factors - one positive and the other negative. The positive is the sharp decline in FII selling to just Rs 548 crores yesterday.”

“This is an indication that the FII tactical trade of ‘Sell India, Buy China’ is coming to an end. With more DII and retail money coming to the market and FII selling tapering off, the market may get a near-term boost, aided by the festive mood,” he added.

Vijayakumar noted that with Nifty now trading at about 24 times FY25 estimated earnings, there is no valuation comfort in the market and indicated that this negative factor “will cap the rally driven by domestic money”.

He further added that investors should focus on fairly valued largecaps where earnings visibility is good. “This trend is already evident in the price action yesterday which saw Bank Nifty move up by 2.07% in contrast to Nifty’s 0.52% up move,” he said.