Dalal Street has seen a weak trend in the past few sessions, with benchmark indices slipping for the fifth day in a row. As the week heads towards a close, the market looks likely to end in the red, raising the question of whether markets are moving into a consolidation phase.
Mayuresh Joshi, Head of Equity Research at William O'Neil India, said that markets may remain range-bound until more clarity emerges from company results.
“I think once there is some element of clarity that comes through, once Q2 numbers start moving in and a large aspect of the street belief is though Q2 absolute numbers might be soft, the management commentaries might actually head to better numbers in Q3 and Q4. And if that starts taking place, I think markets will start sensing that earnings might just bottom out and might start coming up an inch higher as we start heading into the next few quarters,” he said.
He added that government spending on infrastructure along with signs of private capital expenditure picking up could support the market in the medium term. However, for now, weak performance in large sectors like banking and IT is holding back the indices.
“Till that point of time, I think it's going to be still that consolidation action that you're probably going to see as far as the main indices are concerned. Because a large part of that index, both banking and IT are not performing at all and therefore I think in the broader markets, certain sectors and certain stocks which are domestically focused might do well,” Joshi explained.
IMPACT OF HEAVY IPO PIPELINE
Apart from sector-specific issues, the ongoing rush of initial public offerings has also influenced secondary markets.
Shailendra Bhatnagar, Chief Analyst & Editor Markets at Business Today Television, said that investor money is shifting from listed stocks into new issues.
“As far as markets are concerned, the amount is finite. So investors either go into the secondary market or pull it out and put it into primary market. So 15 IPOs are going to get listed in this Navratra and money is flowing in from secondary to primary and the three major ones that you mentioned, Tata Capital, PhonePe and of course LG India. All that money is going to come in from secondary markets and this is the reason, another reason why you see this profit booking for the fifth day in a row as far as the Dalal Street is concerned,” Bhatnagar said.
IT SECTOR UNDER PRESSURE
The technology sector, a major driver of markets, is facing multiple headwinds. Joshi explained that global developments and business challenges are weighing on IT stocks.
“I think a large part of the price correction is now done. But the street is of the belief that all the issues that are probably lingering as headwinds, add to that the late H1B controversy that is probably playing out. And the business model, which itself now probably is under some element of pressure as far as the new agentic AI models platforms globally and competitively are concerned. How does that have a say in terms of new orders, margins of these orders, pricing of these orders as well, as well as the time cost effort that probably will go in terms of developing new platforms and upskilling their employee base as well,” Joshi said.
He added that companies adopting new technologies faster may have an advantage.
“We were always of the belief that companies which are a little bit more adoptive in terms of incorporating these technologies might continue doing well. And therefore, the only stock that we are probably still holding in our global portfolio is Emphasis. Because I think Emphasis is doing a lot more as far as AI is concerned. And that portion might actually continue going higher in the next few months,” he noted.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
