The earning season for the second quarter (Q2FY25) is almost over, with all major companies already reporting their quarterly results. It was a disappointing quarter for the Indian companies as 45% of companies missed estimates. Poor results, coupled with other factors, have led to a fall of nearly 10% of the broader indices like NIFTY50 from the recent high. Many index heavyweights have seen sharper declines, with 20 stocks correcting more than 10% and five stocks falling by as much as 15%. Let us look at the Underperforming Stocks & Sectors with maximum impact.
Stocks and Sectors with Maximum Fall
Here are the few sectors and stocks that have corrected the most in the recent fall:
Technology and IT Services: The IT sector stocks experienced a significant fall due to a confluence of factors. A slowdown in global tech spending, particularly from major economies like the US and Europe, has reduced the demand for Indian IT services. Furthermore, currency fluctuations, especially the rupee’s depreciation against the dollar, eroded profit margins for these companies. Companies such as Tech Mahindra, HCL Technologies, and Mindtree were particularly impacted by these challenges, resulting in substantial declines in their stock prices.
Real Estate: The real estate sector faced headwinds from rising interest rates. Sadly, with inflation still not under control, the interest rates are expected to remain higher in the coming months.
As you can see, the Nifty Realty Sector has been continuously falling since the end of September. Also, with the higher borrowing costs, demand for housing and commercial properties has declined. This, coupled with economic uncertainties, impacted the profitability of real estate companies. Top real estate companies saw their stock prices decline as a result of these economic factors. For example, Sobha Limited’s share price has fallen more than 10% in the six month period.
Mid-Cap and Small-Cap Stocks: Mid-cap and small-cap stocks have been the most hit. However, they have given the exceptional rally earlier in the years, and therefore, the recent fall is still not hurting the investors. More than 100 companies have fallen over 25% in the last two months. What are the reasons? First and obvious is the premium valuations. Small and mid-cap companies have been trading at super-high valuations. Add to it, weak earnings reports from these companies – it led to sharp corrections. Many of these companies are heavily reliant on domestic demand, which was affected by the slowdown in economic growth.
Financial Services and NBFCs: The financial services and NBFC (Non-Banking Financial Companies) sector in India witnessed a decline in November 2024 due to several factors. Rising interest rates and concerns about asset quality have led to a slowdown in loan growth and increased provisioning for bad loans. Additionally, the global economic slowdown and geopolitical tensions have impacted investor sentiment, leading to capital outflows from the Indian market. As a result, shares of many leading financial institutions and NBFCs experienced significant price corrections.
What should investors do?
The recent is making investors nervous, but investors should understand that the fall is part of the market cycle. Here are a few things investors should do:
- Stay Calm and Avoid Panic Selling: Emotional decisions often lead to poor investment outcomes. Panicking and selling during a market downturn can lock in losses.
- Reassess Your Investment Strategy: Investors should review their long-term financial goals and risk tolerance. Ensure your portfolio is aligned with your investment objectives. Consider rebalancing your portfolio to maintain your desired asset allocation.
- Focus on Quality Stocks: Invest in quality stocks on industry analysis in fundamental analysis and long-term growth prospects. Avoid speculative stocks or those with high valuations. You can consult a best stock market advisor in India to pick stocks for long term or download the Jarvis app.
- Rupee-Cost Averaging: The correction allows you to average out quality stocks. Also, you can invest a fixed amount regularly, regardless of market conditions. It can help reduce the impact of market volatility.
Conclusion
If you are looking for the best long term stocks, you can download the Jarvis Invest app and get started with your equity advisory services. The app has a risk management system to ensure you are least impacted even in the correcting market.