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Bears attacked Dalal Street on Friday, breaking its six-day winning streak, due to dismal June quarter results from Infosys and Hindustan Unilever.
The S&P BSE Sensex plunged 888 points, or 1.3 per cent, to settle the session at 66,684. In the intra-day trade, it tanked over 1,000 points to hit a low of 66,534. On the NSE, the Nifty50 closed at 19,745, sinking 234 points or 1.17 per cent, It touched a low of 19,700 during the day.
IT major Infosys turned out to be the biggest drag for headline indices, cracking over 9 per cent after the company lowered growth guidance for fiscal year 2023-24 (FY24).
Sectorally, Nifty IT was the worst performer (down 4.6 per cent), whereas Nifty Media index emerged as the winner in a weak market (up 1.2 per cent).
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Analysts cite that any negative news prevailing in the market may lead to a sharp correction, given premium valuations.
"Investors should keep in mind the fact that at the current Nifty PE of above 20 based on FY24 estimated earnings, there is no valuation comfort in the market. Barring the US, India is the most expensive market in the world now. At high valuations, some negative triggers can lead to sharp correction," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Meanwhile, here are the top factors behind Friday's market fall:
Infosys cracks on lowered FY24 guidance: Shares of Infosys tumbled 9.4 per cent in Friday's intra-day trade after the IT major lowered its revenue growth guidance for FY24 to 1-3.5 per cent in constant currency terms from 4-7 per cent, outlined in the previous quarter.
Following this, the company’s sharp downward revision in its growth guidance took most brokerages by surprise. Brokerages unanimously reduced FY24 EPS estimates for the company in the range of 2-4 per cent, with the Street fearing even further downside likely. READ MORE
As a result, the Nifty IT index declined 4.6 per cent, casting a rub-off effect on Persistent Systems, HCL Technologies, Coforge, and Wipro down in the range of 2-5 per cent.
Macquarie downgrades Reliance: Global brokerage firm Macquarie downgraded Reliance Industries to 'underperform' as it believes that the key trigger of the Jio Financial demerger is now behind. They shared a target price of Rs 2,100 apiece (down 24 per cent from Thursday's closing price)
Analysts expect the oil-to-telecom conglomerate to underperform going ahead as it expects muted April-June quarter results. The company is scheduled to announce Q1FY24 results after market hours on Friday, July 21.
The brokerage firm, meanwhile, forecasts the Dalal Street's big boy to see a double-digit fall in Q1FY24 profit, on the back of sluggish performance in the oil-to-chemicals business.
Tepid global cues: Overnight, the US markets witnessed a mixed trading session. Dow Jones emerged outlier of the three major averages, gaining 163 points or 0.4 per cent in Thursday's trade. NASDAQ Composite and the S&P 500 indices, however, declined up to 2 per cent, weighed by disappointing quarterly results from mega tech stocks like Netflix and Tesla.
Asia-Pacific, too, exhibited a similar trend in Friday's trade. Japan's Nikkei 225 fell 0.5 per cent after the country's June core inflation rate was slightly up at 3.3 per cent from May's figure of 3.2 per cent.
On the contrary, South Korea's Kospi and Hong Kong's Hang Seng indices climbed up to 0.6 per cent.
Rupee falters: The domestic currency depreciated 12 paise to 82.05 against the US dollar in Friday's early trade, on signs of a resilient US labour market. In the US, applications for unemployment benefits reached a two-month low, boosting fears that the Fed would keep rates higher, increasing the demand for the greenback.
The US dollar index, which tracks the greenback against a basket of six other currencies, is on course to gain 1 per cent this week, retreating from its 15-month low.
Technical triggers: Analysts at Reliance Securities wrote that the next band of quarterly resistance for Nifty50 would come near 20,400 levels, while on the downside support is placed at 19,600 levels.
Although overall breadth was positive on Thursday, different sectors saw swings between gains and losses, with profit-booking observed in the IT sector.
