Indian markets experienced a reversal of morning gains on Wednesday as selling pressure emerged, particularly affecting private sector banks. The BSE Sensex, which initially surged more than 400 points, is now flat at 70,369.59 points.
Several stocks witnessed declines, with Axis Bank down over 3%, ICICI Bank down over 2%, Asian Paints down over 2%, and TCS down more than 1%. Motilal Oswal Financial Services downgraded Axis Bank to Neutral and revised its TP (target price) to Rs 1,175. The brokerage cited in-line PAT (Profit After Tax) in the third quarter of FY24, driven by healthy other income but offset by increased provisions.
NIMs (Net Interest Margins) moderated by 10 basis points QoQ to 4.01%, and the management indicated that funding costs would continue to rise over the next two quarters. Loan growth remained healthy at 22% YoY/3.9% QoQ, while deposit growth was robust at 5% QoQ. The C/D (Credit to Deposit) ratio moderated 110 basis points QoQ to 92.8%.
The broader market saw a sharp correction on Tuesday, with Nifty Midcap and Nifty Smallcap indices dropping by 3.15% and 2.87%, respectively. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the valuations in the broader market had become excessive and unsustainable. The correction was triggered by sustained selling by Foreign Institutional Investors (FIIs), who sold equity worth Rs 27,830 crores in the last five days.
News and rumors also contributed to the selling, including reports that SEBI is tightening ultimate beneficiary norms for Foreign Portfolio Investors (FPIs) starting February 1. Additionally, there are rumors that the finance minister may tweak the Long-Term Capital Gains (LTCG) tax, potentially affecting investor advantages.
Vijayakumar suggested that further selling by FIIs and more corrections in the broader market are likely. Investors may consider waiting for the market to stabilize, with safety found in fairly priced large-cap stocks.
(With Agency Inputs)
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