India's Nifty 50 and Sensex were not immune to the increased volatility that was witnessed in recent trading sessions on financial markets throughout the globe. Investor optimism has been clouded by a mix of disappointing Q3 profits that big Indian corporations have reported thus far and weak global cues.
The poor third-quarter results of HDFC Bank, the nation's biggest private bank, have been a major cause of the underperformance of the Indian markets over the past two trading sessions. The market was rocked by the loss in HDFC Bank shares, which led to a significant drop in the Nifty 50 and Sensex.
HDFC Bank reported its December quarter figures (Q3FY24) on Tuesday, January 16, however its deposit and liquidity measures fell short of street predictions. The NIMs have been influenced by constrained liquidity and growing funding costs.
Net interest margin (NIM) on total assets decreased to 3.4% by the bank from 3.65% in the prior quarter (Q3FY23). It's important to remember that the bank's NIM was higher than 4% prior to its merger with Housing Development Finance Corp. (HDFC), the parent firm.
Due to poor performance, investors quickly dumped HDFC Bank shares, resulting in the bank losing ₹1.4 lakh crore in market capitalization in just two days on January 17 and 18. The bank's huge 14% weight in the Nifty 50 and 30% weight in the Nifty Bank index have made the market fall worse.
A number of international factors, in addition to HDFC Bank's worries, have put further pressure on the markets. These include a sharp increase in US bond yields, a decline in the likelihood that the US Federal Reserve will cut interest rates immediately, significant FPI withdrawals, a one-month high for the US Dollar, a sharp spike in the price of crude oil, and problems with Red Sea shipping.
Foreign Portfolio Investors (FPIs) have been pulling out of emerging markets due to the spike in US bond yields. Between January 17 and January 18, ₹20,000 crore worth of Indian stocks were sold by FPIs. It is suggested by analysts that FPIs may sell more if US bond yields keep rising.
The Nifty and Sensex have both dropped by around 2% over the last four trading sessions, following the lead of their Asian peers. Over the past four trading sessions, the Kospi in South Korea fell by 2.42%, while Taiex fell by 1.62%.
Foreign Portfolio Investors (FPIs) have been pulling out of emerging markets due to the spike in US bond yields. Between January 17 and January 18, ₹20,000 crore worth of Indian stocks were sold by FPIs. It is suggested by analysts that FPIs may sell more if US bond yields keep rising.
The Nifty and Sensex have both dropped by around 2% over the last four trading sessions, following the lead of their Asian peers. Over the past four trading sessions, the Kospi in South Korea fell by 2.42%, while Taiex fell by 1.62%.
Vinod Nair, Head of Research at Geojit Financial Services, made the following statement about the recent performance of the market: "Corporate earnings growth doesn't align with the market's high valuation based on initial Q3 results." The outcomes aren't horrible, but they're not good enough to keep the excitement going."
Concurrently, FIIs are being cautious with emerging markets because it's possible that the Fed won't lower rates as sharply in CY24 as first anticipated. In the short to medium term, investors should exercise caution. The two most important things for retail investors to focus on are sector rotation and equity safety. Information Technology, Pharma, Infra, and FMCG are among the industries that are thought to be secure," he said.
