Mixed quarterly results, dashed expectations for global interest rate cuts, concerns about high valuations, rising US bond yields and selling by foreign portfolio investors have pushed the equity benchmark to record highs since the BSE Sensex. The stock price was depressed by 2,505.02 points (3.20%). Several index constituents such as HDFC Bank Ltd, ITC Ltd, Bajaj Finance Ltd, IndusInd Bank Ltd and Asian Paints Ltd have actually entered the correction phase and have fallen more than 10% since then.
On Monday, the 30-pack index hit a low of 70,922.57, down 673 points from its previous close of 71,595.49. “Weak valuations across the market are a concern. From a long-term perspective, large-cap stocks are safe,” said Vijayakumar, chief investment strategist at Geojit Financial Services.
HDFC Bank's share price has fallen 17% since January 16. The financier disappointed the public with its quarterly results. Analysts believe that if systemic CASA growth remains weak, HDFC Bank will not be able to achieve the return on assets (ROA) and return on equity (ROE) levels required for a full rerating. He said there would be delays. On Monday, the scrip was trading 1.23 per cent lower at Rs 1,386.
“If System CASA's growth accelerates and HDFC Bank is able to mobilize market share in line with its recent history, significant earnings expectations could materialize and the stock price could be significantly revalued,” BNP Paribas said. Ta.
In ITC's case, third-quarter numbers were broadly in line with street expectations, but the stock's price declined after its largest shareholder, British American Tobacco (BAT), recently signaled a potential sale of its stake in the hotel tobacco conglomerate. It became a burden. Foreign brokerage firm Jefferies has lowered its target price for the company's stock to 430 rupees from 520 rupees. Tobacco stocks have fallen 14% since January 16th.
Bajaj Finance Ltd's share price has been hit by concerns over deteriorating asset quality and rising credit costs in the December quarter. Analysts said that for the BFSI sector as a whole, deposit rates and margins could come under pressure as credit and deposit growth continue to diverge and liquidity is tight. Bajaj Finance fell 0.90 per cent to Rs 6,594.95. The stock has fallen 12% since the Sensex hit its all-time high.
IndusInd Bank and Asian Paints are two other stocks that have fallen more than 10 per cent each since the Sensex peak. For IndusInd Bank, the December quarter was a stable quarter operationally but there were some issues with asset quality. Slippage in the third quarter increased to 2.6% annually), primarily due to an increase in retail slippage in MFIs and auto loans, Nomura India said in a recent note.
In the case of Asian Paints, there are some concerns about increased competition. Phillip Capital said rich valuations leave no room for execution failure.
“Loss of market share in paints due to intense competition could be a significant trigger for a downgrade. With a three-year average P/E ratio of 52x), investors are advised to make some hay while the sun still shines and take advantage of this opportunity to position themselves ahead of Grasim's launch. We recommend that they be put in place.”
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