Benchmark indices traded with deep cuts after a lower than expected results performance by HDFC Bank and Infosys. The Nifty traded down 1.8% or 308 points at 17167 while Sensex was down 2%, or over 1000 points, at 57172 at 12 pm IST.
Banking heavyweight HDFC Bank traded down almost 4% at Rs 1409.6 after reporting the lowest net interest margin in 27 quarters at 4% while Infy traded down 7.3% at Rs 1620 after reporting lower profit margin and reduced guidance . Almost 3 Nifty stocks declined for one that advanced. Fear gauge India Vix jumped 10.41% at 19.64.
Nifty IT was the biggest loser down 4.6% followed by Nifty PSU Bank at 2.51% and Nifty Financial Services down at 2%. Private lenders also bore the brunt of the Monday sell-off with Kotak Bank down 2%, and Axis down a percent intraday.
The markets were spooked also by higher wholesale price inflation which grew by 14.55% in March, with core inflation at 10.9% . Retail level inflation for March earlier grew by 6.9% above the RBI’s upper-level threshold of 6%, thanks to elevated energy and food prices.
Higher inflation bites into margins of companies as they are unable to pass on the full rise in input costs to consumers for fear of demand erosion. The only outliers were Nifty metal index and Nifty FMCG index which traded marginally in the green.
Index gainers included Tata Steel and ONGC, up 1.9% and 1.4% each. An across the board earnings downgrade cannot be ruled out, given the impact of higher input prices on company margins.