Sustained selling pressure by foreign institutional investors (FIIs) due to a slowdown in the US and Europe, and worries over the after-effects of rising interest rates dragged 11 Nifty stocks down by over 20 per cent from their 52-week highs. A fall of 20 per cent or more by a stock or an index from its recent high is considered as a bear grip.
All eyes are now on the forthcoming quarterly results which will pave the way for the domestic equity market going ahead. Shares of Tata Consultancy Services (TCS), which will announce its December quarter results on January 9 (Monday), dipped 21 per cent to Rs 3,213.90 on January 6 against its 52-week high of Rs 4,045.50.
Another IT major Wipro retreated 47 per cent from its 52-week high of 721.55 to 382.50 on January 7, 2022. Tech Mahindra (down 44 per cent), Infosys (down 26 per cent) and HCL Technologies (24 per cent) stood among the other major losers from the IT space.
According to HDFC Securities, the IT sector is expected to post a soft quarter, impacted by Q3 seasonality and worsening macro. The elements of macro volatility are resulting in growth moderating towards pre-Covid even as long-term drivers are unchanged.
The brokerage has an ‘add’ rating for Tata Consultancy Services with a target price of Rs 3,545, indicating an upside of 10 per cent from the current market price.
HDFC Securities is also bullish on Infosys (target price: Rs 1,815), HCL Technologies (target price: Rs 1,090), Wipro (target price: Rs 430), and Tech Mahindra (target price: Rs 1,150).
In the IT space, market participants should zero in on the commentary and progression on client budgets, the outlook of key verticals, and commentary on the pipeline, bookings trajectory, and hiring intensity. HCL Technologies and Infosys will announce their Q3 results on January 12, while Wipro is slated to report its earnings on January 13.
Aluminum major Hindalco Industries is another major loser on the list. Shares of the company have retreated 27 per cent to Rs 463.95 on January 5 against its 52-week high of Rs 636 on March 29, 2022.
Tata Motors, Divi’s Laboratories, Oil and Natural Gas Corporation, Bajaj Finance and Bajaj Finserv have also declined somewhere between 23 per cent and 28 per cent so far from their respective 52-week high levels.
There are expectations that Tata Motors may report a narrowing of losses for the December quarter while Maruti Suzuki and Mahindra & Mahindra (M&M) may post strong bottom-line growth in the quarter gone by.
Prabhudas Lilladher, a stock broking company, has a target of Rs 520 on Tata Motors, Rs 10,000 on Maruti Suzuki, and Rs 1,560 on M&M for now. The company said the premiumisation trend will continue to play out across segments.
Tata Motors is set to announce its Q3FY23 results on January 25. “We expect JLR volumes to grow in mid-single digits led by servicing of an order book and semiconductor supply improving,” Prabhudas Lilladher said.
While sharing its view on the NBFC sector, Prabhudas Lilladher said, “Overall, NBFCs to report mixed earnings in Q3 due to strong AUM growth of around 4.25 per cent QoQ led by vehicle financiers (CV upcycle), retail loans and slight moderation in margins due to rising cost of funds. However, as a whole we expect NBFCs to report margins of around 10.19 per cent (against 10.20 per cent in Q2), as strong disbursements and yield transmission cushions rising cost of funds.”
In the NBFC space, Prabhudas Lilladher prefers Bajaj Finance with a target price of Rs 8,953. The company also likes Cholamandalam Investment & Finance Corporation (target price: Rs 792) and Manappuram Finance (target price: Rs 144) in the broader space.
Meanwhile, barometer indices BSE Sensex and NSE Nifty also declined around 5 per cent from their respective 52-week high levels.