IT, FMCG stocks drag equity markets down on weak Q1 performance

After a bull run for six days, equity markets crashed today due to disappointing first-quarter performances from larger corporates, including Infosys and Hindustan Unilever Ltd. At close, the Nifty was down 1.17 per cent, or 234.2 points, at 19,745, shattering the dreams of investors who were expecting the index to cross the 20,000 mark. The Sensex was down 887.64 points or 1.31 per cent, at 66,684.26

The sell-off on Friday was primarily triggered by a major slump in information technology stocks, following Infosys’ grim revenue outlook and concerns over client spending. The Nifty IT index plunged over 4 per cent, with the shares of almost all the major IT services companies, including HCL Tech, Wipro, TCS, and Tech Mahindra, declining. Similarly, HUL’s weak volume growth dragged down FMCG stocks.

Disappointing performance

Prashanth Tapse, Research Analyst, Mehta Equities Ltd, said, “Nifty ending its winning streak due to disappointing Q1 performances from Infy (-8.41%) and HUL (-3.82%). Overbought conditions and high greed contributed to the sell-off. Investors now await RIL Q1 results, expecting a consolidation around 19,501 with resistance at the psychological 20,000 mark. Caution is advised in this return of risk.”

• Also Read: FMCG companies see double-digit growth on e-commerce in FY23

Global stocks were mixed on Friday as the tech sell-off on Wall Street sent jitters through the market while investors prepared for key central banks to announce their latest policy decisions next week.

Amol Athawale, Vice President, Technical Research, Kotak Securities Ltd, said, “Overnight fall in tech-heavy Nasdaq triggered a wave of massive correction in local software stocks led by Infosys, which slashed the revenue growth guidance for the rest of the year due to sharp deterioration in discretionary spending by the clients. The record upsurge in the markets in such a quick time was already raising concerns about expensive valuations, and hence investors took this opportunity of weak US cues to prune their holdings, although India’s fundamentals remain on strong footing.”

• Also Read: FMCG companies’ margins expected to improve in FY24: Report

Ajit Mishra, SVP, Technical Research, Religare Broking Ltd, expects Nifty to spend some time around the current levels. “Participants should focus more on risk management for existing trades and prefer sectors that are showing resilience for fresh positions. Among the key sectors, banking and financials still look promising for further upmove, while the crack in the IT pack has delayed its reversal, so plan accordingly,” Mishra said.