Indian shares fall on worries over likely slowdown in earnings

Indian shares dropped on Thursday, with heavyweight HDFC Bank leading the decline, as anxiety over a likely moderation in third-quarter corporate earnings sapped investor confidence.

The Nifty 50 fell 0.69% to 23,526.5, while the BSE Sensex shed 0.68% to 77,620.21.

The broader, more domestically-focussed smallcaps and midcaps dropped 1.4% and 0.9%, respectively.

India’s blue-chip indexes have lost about 2% so far this week, while the smallcaps and midcaps have fallen 4.8% and 3.8%, respectively, on worries over a slowdown in earnings and sustained foreign outflows.

Foreign portfolio investors have sold Indian shares in five of the six sessions so far in January, aggregating to net outflows of 119.32 billion rupees ($1.4 billion).

Recent business updates from two-wheeler maker Hero MotoCorp and consumer firm Dabur India have not inspired confidence that earnings will improve from the previous quarter, the worst quarterly performance in four years for Indian firms.

Indian benchmarks end flat as earnings worries counter gains in Reliance, TCS

“Concerns of continued moderation in earnings growth in December quarter is keeping markets on tenterhooks,” said Narendra Solanki, head of fundamental research of investment services at Anand Rathi Shares and Stock Brokers.

“The results season will act as a litmus test for domestic equities, especially the small and midcaps, where earnings delivery will be mandatory to justify the valuations,” Solanki said.

Twelve of the 13 major sectors declined on the day.

High-weightage financials shed 0.9%, dragged down by a 1.6% fall in HDFC Bank - the heaviest stock on the benchmarks.

Top IT firm Tata Consultancy Services is due to release its results after the closing bell. TCS fell 1.7%, dragging the IT index 1.2% lower.

Among individual stocks, food delivery platform Swiggy rose 3.4% after Bernstein started coverage with an “outperform” rating.

Drugmaker Zydus Lifesciences rose 2.8% after Nomura upgraded the stock to “buy” from “neutral”, citing a likely uptick in earnings due to contribution from its anti-diabetic medication Sitagliptin.