logo
What should investors do as subdued Q1 results, tariff tensions extend stock market losses? Explains Geojit's Vinod Nair

What should investors do as subdued Q1 results, tariff tensions extend stock market losses? Explains Geojit's Vinod Nair

Mint4 days ago
The Indian equity market initiated the month of July on a selling note, driven by persistent global trade tensions and a subdued start to the Q1FY26 earnings season. Investor sentiment was further weighed down by delays in the India–US trade pact and the US extension of tariff deadlines. News like the imposition of a 35% levy on Canadian, 50% on copper, 25% on Japan, and sending a tariff threat letter to 20 countries intensified the concerns.
Despite the broader indices slipping into negative territory, selective buying emerged in consumption-oriented sectors such as FMCG and discretionary stocks. This was supported by signs of urban & rural demand revival, easing inflation, declining interest rates, and a favourable monsoon—all of which contributed to margin improvement and a positive undertone on volume growth.
Key underperformers were in the IT sector, weighed down by weak results from key bellwethers and expectations of deferred orders and investments. This raised concerns over FY26 earnings estimates and added to valuation pressures. Investors are now closely watching corporate guidance on margins and sector dynamics as the earnings season unfolds.
However, after the initial setback, the prices of IT stocks are stabilising with a reduction in volatility due to deep value trading near 5years -1SD (standard deviation) forward P/E valuation and hope of a rebound in business in CY26 as the Nasdaq100 index has breached to an all-time high.
Banking stocks have a muted trend, which is expected to continue in the short term, facing headwinds from NIM contraction and sluggish growth in advances, which could impact its profit performance in the short-term. Also, the valuation appears somewhat stretched at current levels, suggesting that the upside may be limited in the near future. However, with regulatory support such as liquidity infusions and other revival measures, the banking sector is expected to recover over the medium to long term. We continue to maintain a positive outlook on the industry, and back stocks with a moderate credit-to-deposit ratio and improvement in asset quality, which provide a cushion against short-term volatility.
Markets attempted a partial rebound this week, driven by optimism over a potential interim trade deal with the U.S. and multi-year low domestic inflation, which boosted hopes of RBI rate cuts and economic acceleration. However, the continuation of subdued quarterly results, the clamp in the global market, and the premium valuations of India led to further losses in the market. Investors are adopting a selective approach, focusing on earnings visibility and sector resilience. Mid & Small cap were able to perform marginally better.
The key intake of the month is that India's macroeconomic outlook remains strong, supported by easing inflation, lower interest rates, a healthy monsoon, and softer oil prices. A drop in inflation in eight straight months has provided an optimism to the market. However, investors are showing a mix of optimism and caution to assess the Q1FY26 corporate earnings, as an upgrade in earnings is the most essential fact in the premium-valued stock market.
The author, Vinod Nair, is Head of Research at Geojit Financial Services.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making investment decisions.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

46th Ganesh Utsav to champion indigenous products, unity
46th Ganesh Utsav to champion indigenous products, unity

Hans India

time23 minutes ago

  • Hans India

46th Ganesh Utsav to champion indigenous products, unity

Hyderabad: The 46th grand Shri Ganesh Utsav in Hyderabad will be organised from 27 August to 6 September under the aegis of the Bhagyanagar Ganesh Utsav Samithi. This year, the Samithi announced the festival would focus on spreading awareness about the use of indigenous products, fostering social harmony, and promoting cultural nationalism. Samithi president G Raghav Reddy formally launched the event by performing a Ganesh worship at the Samithi's office in Baheti Bhavan, near Siddiamber Bazar. Ravinutla Shashidhar, official spokesperson for the Vishwa Hindu Parishad (VHP), highlighted that the Ganesh festival typically generates a turnover of approximately Rs 5,000 crore. He stated that efforts would be made to ensure Indian professionals benefit from this economic activity. Furthermore, under the umbrella of this festival, the Swadeshi Jagran Manch will distribute a list of indigenous and foreign products, inspiring the public to prioritise Indian-made goods. Shashidhar noted that this year's celebrations will coincide with significant anniversaries: the 150th Birth Anniversary of Sardar Vallabhbhai Patel, the 125th Birth Anniversary of Jan Sangh founder Shyamaprasad Mukherjee, and the centenary celebration of the Rashtriya Swayamsevak Sangh. Accordingly, awareness campaigns promoting unity, social harmony, and nationalism will be conducted at every Ganesh Pandal. He affirmed that despite numerous obstacles over the past 46 years, Shri Ganesh Utsav has been celebrated with grandeur and without hindrance, a tradition that will continue this year. Committee Advisor M Ramaraju expressed concern that the original purpose behind conceiving the collective celebration of Shri Ganesh Utsav four decades ago was being overlooked. He stressed the importance of educating society about Dharma Raksha (protection of righteousness), Kirtan (devotional singing), and organisational power at Shri Ganesh pandals for the entire 11-day duration. Ramaraju emphasised the necessity of ensuring that non-believers and 'traitors' do not receive any financial support from the festival, asserting that such funds could be used to attack Sanatanis.

Indian stock market opens flat, IT stocks under pressure
Indian stock market opens flat, IT stocks under pressure

Hans India

time23 minutes ago

  • Hans India

Indian stock market opens flat, IT stocks under pressure

Mumbai: The Indian stock market opened flat on Thursday as IT companies experienced selling pressure amid mixed global cues. At 9.28 am, Sensex slipped 110 points or 0.13 per cent to 82,615 and Nifty slipped 13 points or 0.05 per cent to 25,206. Sectorally, Nifty IT underperformed with a loss of 1.17 per cent. All other sectors show marginal dips to moderate gains. Bank stocks showed moderate losses up to 0.20 per cent. Midcap and smallcap stocks saw selling pressure. Nifty midcap 100 index was down 0.39 per cent at 59,148 and Nifty smallcap 100 index was down 0.07 per cent at 18,879. In the Nifty pack, Dr. Reddy's Laboratories led the gainers (3.07 per cent), followed by Tata Motors (1.51 per cent). Tata Consumer Products, Eicher Motors, JSW Steel and Tata Steel were other major gainers. Trent, Kotak Mahindra Bank, and Bajaj Finance were among losers in early trade. "Market sentiment remains cautiously optimistic amid heightened volatility and mixed global cues. Nifty 50's rebound highlights buyer strength at lower levels. A sustained move above 25,250 could potentially open the path toward the 25,330 mark. On the downside, immediate support is placed at 25,125, followed by 25,000," said Hardik Matalia from Choice Equity Broking Private Limited. The Bank Nifty outperformed the broader index, rising 454 points and forming a bullish candlestick, indicating renewed buying interest, he added. Both Asian and US indices posted strong overnight gains, lending a positive backdrop for Indian markets as they open. In the US, the Dow Jones Industrial Average advanced 1.14 per cent. Nasdaq rose 0.61 per cent, and the S&P 500 added 0.78 per cent. According to analysts, the US striking trade deals with many countries is slowly removing concerns surrounding tariff wars. Good corporate earnings in the US are providing the fundamental support to the market. In Asian markets, the Nikkei 225 continued a huge upswing for the second consecutive day (1.97 percent), and Indonesia's Jakarta Composite climbed 1.70 per cent. Hong Kong, Shanghai and Seoul were in the green zone. On July 23, foreign institutional investors (FIIs) were net sellers for the fifth consecutive session, offloading stocks worth Rs 4,209 crore. In contrast, domestic institutional investors (DIIs) remained strong buyers for the 12th straight day. They net purchased shares worth Rs 4,358 crore.

Policymakers need to be vigilant of evolving global crude price dynamics impact: RBI
Policymakers need to be vigilant of evolving global crude price dynamics impact: RBI

Hans India

time23 minutes ago

  • Hans India

Policymakers need to be vigilant of evolving global crude price dynamics impact: RBI

New Delhi: While active government intervention has contained spillover to domestic oil prices, policymakers need to be vigilant and cautious of the direct and indirect impact of the evolving global crude price dynamics through continuous assessment, given India's increasing dependence on crude oil imports, the Reserve Bank of India (RBI) has stressed. In this regard, government policies would play a pivotal role in containing the impact, said the RBI in a paper titled 'Revisiting the Oil Price and Inflation Nexus in India' in its latest Bulletin. 'Specifically, reducing crude oil dependence by promoting alternate non-fossil energy usage and regional free trade agreements and bilateral treaties with major oil exporters could be explored for oil imports at favourable prices,' the paper emphasised. In recent years, India's net import demand for crude oil has remained strong, fuelled by consumption growth and robust economic activity. Oil prices and their inflationary impact is a key metric that sensitise monetary policy formulation in economies vulnerable to oil price shocks, particularly net oil importers, where rising oil prices can significantly dampen economic growth and stoke inflation pressures. 'The direct impact of international crude oil price changes to domestic petrol and diesel inflation, and indirectly through transportation and input costs, is evident in the post-deregulation period albeit at a subdued level as government intervention by taxes, cess and regulation of oil marketing companies has often muted the impact,' the RBI paper noted. The results of the empirical analysis suggest that a 10 per cent increase in international crude oil prices could raise India's headline inflation by around 20 basis points on a contemporaneous basis. 'Although the pass-through to retail prices has remained contained with active government intervention, increasing dependence on crude oil imports may have inflationary consequences in the long run, warranting constant vigilance and careful monitoring of its potential impact,' said the RBI paper. Meanwhile, India is taking steady, confident steps towards oil self-sufficiency and under Prime Minister Narendra Modi's leadership, the country is securing its energy future, step by step, Petroleum Minister Hardeep Singh Puri said recently. While 1 million square km offshore area is now open for oilfield exploration, 99 per cent of 'No-Go' areas have been cleared. The oil and gas blocks being offered under the Open Acreage Licensing Programme (OALP) have already garnered attention from global and domestic energy players, and Round X is expected to set new benchmarks for participation and investment.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store