Closing Bell: Market Sees Worst Week In 14 Months, Sensex & Nifty Fall For 4th Week; Midcaps Drive Losses

The Indian stock markets closed deep in the red on Friday, driven by lacklustre Q2 earnings and widespread sell-offs, especially in midcap and smallcap stocks. The BSE-listed companies collectively erased over Rs 6 lakh crore in market capitalization on Friday alone.

The Sensex closed 663 points down at 79,402, while the Nifty fell 219 points, ending at 24,181. The midcap and smallcap indices took a more severe hit, each declining by around 2%, with the BSE Midcap Index slipping by 1,072 points to close at 55,278, and the Nifty Bank index dropping 744 points to 50,787.

The ongoing earnings season has heightened volatility, especially among midcap and smallcap stocks. As the indices posted steep declines, midcap stocks faced some of the largest losses, with market breadth showing a stark imbalance in favour of declines; the NSE advance-decline ratio ended at a concerning 1:5. This sharp downturn in midcaps marked the largest weekly loss for the segment since December 2022, reflecting investor concerns over valuations amid weaker-than-expected earnings reports.

Almost all sectoral indices closed lower, with the FMCG sector being the sole gainer, supported by strong quarterly results from industry heavyweights. Metal and PSU stocks were among the worst hit, reflecting investor caution amid global commodity price uncertainties and weaker financial reports from several public sector enterprises.

Among the Nifty stocks, a majority faced declines, with 40 out of 50 closing lower. IndusInd Bank, hit hard by disappointing Q2 numbers, led the declines with a dramatic 20% drop. HPCL and BPCL also saw significant losses, falling between 5-8% after reporting underwhelming quarterly performances, while Shriram Finance slipped 5% ahead of its upcoming results. In contrast, a few FMCG stocks, including ITC, Britannia, HUL, and Nestle, managed to rise, with ITC gaining 2% on the back of solid Q2 earnings.

IndusInd Bank suffered one of the most significant losses on Friday, plummeting 20% after its Q2 results failed to meet market expectations. Dixon Technologies saw profit booking after reporting strong earnings, ending the day with an 8% loss. Engineering giant L&T slid 3% following a downgrade to 'neutral' by UBS.

Bucking the overall market trend, ITC's robust Q2 performance helped it rise by 2%, making it one of the top gainers in the FMCG sector. Following regulatory approval of Amitabh Chaudhry's reappointment as CEO, Axis Bank shares gained 2%, a rare positive in a largely downbeat financial sector. Despite reporting a weaker Q2, Laurus Labs attracted buying interest, closing up by 4%.

The market remained notably skewed towards declines, with a substantial number of stocks posting losses. The broad-based sell-off saw BSE-listed companies losing more than Rs 6 lakh crore in market cap just on Friday. Throughout the week, 46 out of 50 Nifty stocks recorded losses, with many dropping by as much as 22%. In total, the Sensex, Nifty, and Nifty Bank recorded nearly 3% declines, while the midcap index fell by 6% over the week, marking one of the longest losing streaks since August 2023.

The market's downturn this week has extended the losses for the fourth straight week, marking the longest weekly losing streak since August last year. With the mid and smallcap indices leading the declines, it was the biggest weekly fall for these segments since December 2022. The PSU and metal indices saw the most significant declines, while the FMCG index remained the only gainer. Key Nifty losers this week included names like IndusInd, Tata Consumer, Adani Enterprises, Hindalco, and BPCL, which faced selling pressures due to underwhelming quarterly reports and a bearish market sentiment.

The cumulative impact saw BSE-listed companies shedding over Rs 20 lakh crore in market cap throughout the week, highlighting the extensive wealth erosion faced by investors amid ongoing market challenges.

As earnings season continues, investor focus is expected to remain on quarterly performance trends and potential recovery signals in sectors like banking and infrastructure. However, given the ongoing market volatility and sector-specific headwinds, analysts predict further caution in the near term. The outlook for midcap and smallcap segments appears especially challenging, as valuations remain under pressure amid high market expectations and concerns over future growth potential.

With global uncertainties and local factors, including inflation concerns and regulatory changes, market experts suggest that the focus may gradually shift to defensive stocks, including FMCG and select IT stocks.