With Infosys’ American Depositary Receipt witnessing a drop of 15 per cent on Monday, when Indian market were closed for trading, Tuesday’s trading session on Dalal Street was expected to open on a weak note. While it opened in the red territory yet in minutes it was able to move into the green. Infosys stock of course lost its value sharply, but its weakness was made up by financial sector stocks, with private sector shares like ICICI leading the charge in the early part of the trade. Infosys’ woes were triggered by the news that whistleblowers had pointed to faulty accounting in the company approved by top management
Infosys, which has weightage of 6.26 per cent on NSE’s Nifty, witnessed a sharp fall of 16.66 per cent to close at Rs 639 -- its biggest one-day fall in the last six years. By the end of the day, when results of some of the financial sector companies came out, there was some profit booking pressure on their stocks, which brought pressure on Nifty, which ended the day with a decline of 72 points or 0.62 per cent to close at 11,589.90. The BSE’s Sensex also followed pretty much on similar lines, closing the day at 38,963.84, a drop of 334.54 points or 0.85 per cent.
But the fact that indices were able to largely to keep from going under was clearly an indication that the underlying sentiment of the market was continuing to improve. The improved mood was also reflected in the positive market breadth in the mid-cap segment.
What dominated the discussion on the Street on Tuesday were the results of some of the banks and large NBFCs which indicated that the pessimism may be getting over While there was a very small rise in gross non-performing assets, most of the large private banks and NBFCs showed a much better performance than consensus estimates of analysts had indicated regarding their bottomlines. The stress, therefore, be much less than what was being feared. That is probably the reason why the broader market had been performing well in the last couple of trading session.
Even some smaller banks showed that provisions which they had to make for NPAs were getting smaller, indicating that the pressure on banks which have low exposure to real estate assets might be easing. There were talks on the Street that in order to increase the flow of funds from banking to the NBFCs sector, the central government might come out with new guidelines. These would allow NBFCs with higher credit rating to access more funds.
(Shilpa Nagpal is an analyst at Market Wizards Securities Pvt Ltd)
