Selling by foreign investors and a lackluster financial performance by companies in the December quarter impacted market movements for the month. in January 2023 BSE Sensex and Great 50th performed poorly relative to the global equity market. Recent selling pressures from Adani Group companies, as well as weak performance from banks and new-age tech companies weighed on investor sentiment. Sensex and Nifty are down more than 2 percent so far this month. On the other hand, strength has returned to the world’s major markets this year due to positive expectations from the US Federal Reserve.
The US Federal Reserve is expected to slow rate hikes. As a result, the Dow Jones is up about 2.5 percent, the S&P 500 is up about 6 percent, the FTSE 100 is up about 4 percent, the CAC is up more than 9 percent, and the DAX is up more than 8 percent. Speaking of Asian indices, the Nikkei is up 5 percent this year, Hang Seng is up more than 12 percent, and Kospi is up 6 percent. At the same time, Jakarta Composite is also in the green.
FII sales put pressure on the domestic market
According to Raj Vyas, portfolio manager of Teji Mandi, the weak December quarter results and selling pressure from foreign investors are putting negative pressure on the domestic market. FIIs (Foreign Institutional Investors) sold off for the 17th consecutive trading day this month. FIIs have sold $160 million worth of stock this year and are investing in other emerging markets. According to analysts, after the end of the Kovid-Zero policy, foreign investors see China as a great opportunity to invest cheaply in other markets, so they withdraw money from here and invest there.
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The results of the companies also made themselves felt
Talking about the results of 200 companies in the December quarter of 2022, their sales are up about 14 percent, but there is no significant change in operating income on a year-to-year basis. At the same time, net income also fell 5.8 percent, marking the third straight quarter of decline. That being said, personnel expenses increased for the sixth straight quarter on an annualized basis. Employee costs rose 20 percent in the December quarter. Depreciation costs also increased in the December quarter, the fastest in seven quarters. Interest expense also increased 30 percent on an annual basis and 16.5 percent on a quarterly basis from October to December 2022. Speaking of IT companies, the number of employees in these declined, which points to weak demand in the coming quarters.
What’s the next trend
The market is currently awaiting the budget for the next fiscal year 2023-24 presented on February 1st. Apart from that, the Federal Reserve meeting is also held on the same day, which is also awaited. At the same time, the results of the December quarter of 2022 from some companies are also coming. According to Mitul Shah, Head of Research, Reliance Securities, the market will remain sluggish for now before returning to the uptrend. If there is an announcement in the budget regarding the long-term capital gains tax then its impact on the movement of the market will be seen. According to Vinod Nair, Head of Research, Geojit Financial Services, an extension of the tax or hold period will have a short-term impact on the market.
