MUMBAI: Heavy foreign investors selling in counters like HDFC Bank and Infosys, whose March quarter numbers came below Street expectations, dragged down the benchmark equity indices on Monday.
Infosys and HDFC Bank, accounting for close to a fifth of the Nifty weight, fell 7.27% and 4.74%, respectively.
Foreign institutional investors (FIIs) sold shares worth a whopping Rs 6387.45 crore, while domestic institutional investors (DIIs) purchased stocks of Rs 3341.96 crore, provisional BSE data showed. The bellwether Nifty fell 302 points to Rs 17,173.65, while the Sensex plunged 1,172 points to Rs 57,166.74.
“Infosys fell because of weaker than expected operating margin, while HDFC Bank reported record low net interest margin (NIM) , and could have borne sustained foreign fund outflows as it might not make it to the MSCI index,” said Siddarth Bhamre, research head at Religare Broking.
HDFC Bank’s NIM was 4% in Q4 , the lowest in 27 quarters. Also, while HDFC is part of MSCI, HDFC Bank is not and will not post the merger as it failed to meet the minimum foreign legroom of 15%. The bank has estimated legroom of only 10.58% after HDFC amalgamates into it.
Analysts believe that this has led to outflows, which has seen the stock decline 19% from Rs 1,722 on April 4, the merger announcement date, through Rs 1397.5 on Monday. Apart from the poor quarterly results, sustained fears of hardening interest rates in the US amid rising energy and food prices, and the Russian-Ukrainian war is resulting in fund outflows from emerging markets like India, where wholesale prices grew 14.55% in March due to higher crude and commodity prices.
“There are fears of companies in many sectors not being able to fully pass on input prices increases to customers, which will be visible in compressed operating margins in Q4 and that’s causing stocks to tumble,” said SK Joshi , director, Khambatta Securities.
“We expect FY23 to witness continued volatility in equity markets, especially in the first half of the year with rising interest rates globally and high inflation, which is expected to persist,” said Naveen Kulkarni, CIO, Axis Securities. “ We continue to remain positive on sectors like Metals, Hospitals, Hospitality, Oil Refining, Capital Goods, etc. Some underperforming sectors might include Discretionary Consumption, IT, NBFCs, etc.”
