Benchmark indices Sensex and Nifty tumbled in Thursday’s trade, ahead of the kick start of earnings season with index heavyweight Tata Consultancy Services Ltd (TCS). There are fears the earnings season may disappoint investors with muted growth, similar to the previous quarter. This, at a time when the rupee is falling and foreign outflows have intensified, dampened investor sentiment today. Add to the worries is the recent minutes from the US FOMC meet, where Fed officials seemed concerned over inflation, meaning fewer-than-expected rate cuts ahead. Asian markets were weak, and India was no exception.
“Elevated valuations and muted earnings expectations could limit significant market expansion,” Axis Mutual Fund said.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said TCS results will give an indication of what is in store for the IT sector. The strength of the US economy and the depreciation of rupee will be tailwinds for the IT sector, he said
“Segments like hotels, jewellery, automobiles catering to the premium market and airlines are likely to report good numbers. Expectations from President Trump’s policy decisions and the Indian Union Budget proposals will keep the market volatile in the coming days,” he said.
Sensex stood at 77,606.62, down 541.87 points or 0.69 per cent. HSBC has reportedly cut its 2025-end Sensex target to 85,990 from 80,520 earlier. Nifty fell 157.85 points or 0.67 per cent to 23,531.10. Data showed FPIs have sold equities worth Rs 11,435 crore in January so far.
Leading the Sensex losers was HDFC Bank Ltd that fell 1.90 per cent to Rs 1,662 on BSE. Larsen & Toubro declined 1.89 per cent to Rs 3,527.95. Tata group stocks Tata Steel, Tata Motors and TCS slipped 1.73 per cent, 1.72 per cent and 1.45 per cent, respectively.
Analysts are largely expecting TCS to report a flattish constant currency (CC) revenue growth, lower than projections for peers Infosys Ltd and HCL Technologies Ltd. They see a drop in dollar revenue growth sequentially for TCS against a growth for Infosys and HCL Technologies. Margin is seen expanding 20-40 basis points, driven by operating efficiencies.
Adani Ports, Bajaj Finance, State Bank of India, Axis Bank and Zomato declined over 1 per cent each.
ICICI Securities in a strategy note said Nifty valuations had hit a recent high of 23 times (4.3 per cent earnings yield) in September 2024 versus the 10-year bond yield of 6.8 per cent. Since then, the earnings yield has risen to 5 per cent while India bond yields have been stable at 6.8 per cent. “However, the US bond yield (100 bps spike) have been putting pressure on equity valuations,” it noted.
A couple of brokerages such as Nuvama Institutional Equities, MOFSL and Antique Stock Broking are expecting a mere 2-6 per cent growth for Nifty companies in Q3.
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