Indian Stock Markets began with the bears kicking in, with benchmark indices plummeting to one-month lows in broad-based selling on July 28. At 3:11 p.m., Sensex fell 547 points (0.67%) to 80,916 and Nifty shed 152 points (0.61%) to trade at 24,686. These losses followed on the heels of a lackluster Q1 earnings season and renewed fears about heavyweight stocks.
Weaker Earnings Trigger Selloff
A weak quarterly report from Kotak Mahindra Bank put a damper on sentiment, triggering a sharp selloff among other heavyweight stocks. The impact rippled across markets, reflected in the advance-decline ratio: 1,118 stocks rose compared with 2,524 that fell. The impact was more extreme in the broader markets as Nifty Midcap 100 and Smallcap 100 fell more than 1% each, with smallcaps registering their eighth consecutive session of losses.
Latest profits have displayed a severe divergence: while top firms’ profits have remained resilient, owing largely to exceptional items and margin gains, overall top-line expansion is muted. The banking and technology sectors, touted pillars of market strength, spearheaded disappointments. Kotak Mahindra Bank and some other financial giants reported below-par performances, weighing on the indices. As mentioned above, Nifty 50 companies posted 16.6% YoY net profit rises for Q1, but a select few (such as Reliance Industries from the one-off gain) hid more somber trends within the wider market.
Sectoral Snapshot: Realty, PSU Banks Bear the Brunt
On Monday, sectoral indices were colored red. Nifty Realty declined more than 4%, the session’s worst loser, followed by Nifty Media declining 2.6%. PSU Banks and Metal stocks also plunged sharply. Defensives like Pharma (+0.4%) and FMCG (+0.2%) provided some cushion, highlighting investor preference for stability in volatile times.
Expert View: Sideways to Bearish Outlook
Market gurus comment that recent tightening in the Nifty 50 was hidden behind a smallcap rally, which has now fizzled out. The Nifty Smallcap index’s forward P/E multiple has outpaced those of mid- and largecaps and indicates the risk of overvaluation and even correction, as warned by InCred Equities.
Technically, the Nifty’s key resistance level is 25,150. Unless broken, experts expect the outlook to be sideways to bearish, with hopes of reversal depending on a clear breakout above this level. Otherwise, markets can continue to struggle in the absence of firmer earnings momentum or good macro signals.
What’s Next?
As Q1 earnings disappointed, and blue-chip stocks were under pressure, investors are cautioned to remain on guard. Defensive stocks could still remain popular, but absent a substantive healing in earnings breadth or macroeconomic indicators, near-term rallies will likely be truncated.
