Taking Stock: Market gains on another volatile day; IT stocks shine

[view original post]

The Indian benchmarks indices ended on a positive note for the sixth consecutive session on August 3, helped by gains in information technology stocks amid high volatility.

At close, the Sensex was up 214.17 points, or 0.37 percent, at 58,350.53, and the Nifty was up 42.70 points, or 0.25 percent, at 17,388.20.

Amid mixed global cues, Indian shares opened on a positive note but soon slipped into the red. Buying in final helped the indices to close near the day’s high.

“The market has rebounded strongly with a turn in the trajectory of foreign investor flows–the last four sessions have seen FPI inflows of nearly $1 billion,” said S Hariharan, Head- Sales Trading, Emkay Global Financial Services.

“A perceived pivot in the Fed’s tightening cycle and cooling off of crude oil prices have made the macro environment more favourable for India, which has outperformed EM and Asian peers by 6 percent in the last week.

Banks and autos have attracted strongest flows, while IT has been an under-performer. Going forward, the gap in valuations between Nifty and MSCI Emerging Markets index, as well as the gap between the earnings yield of Nifty vs 10 year G-Sec yield, would be adverse factors and market returns can turn more muted, he said.

A pull-back towards the technical support at 200-day moving average at 17,000 is possible, Hariharan added.

Tech Mahindra, TCS, Infosys, Asian Paints and Titan Company were among the major gainers on the Nifty. The losers included Maruti Suzuki, Sun Pharma, Tata Motors, Kotak Mahindra Bank and Coal India.

Except information technology, all sectoral indices ended in the red, with auto, FMCG, pharma and PSU Bank down 0.4-0.8 percent.

Stocks and sectors

On the BSE, the IT index added 1.3 percent, while auto, capital goods, healthcare, metal and realty were down 0.5 percent each.

The broader indices underperformed the benchmarks. The BSE midcap index fell 0.6 percent and the smallcap index was down 0.28 percent.

A short build-up was seen in Indus Towers, Balrampur Chini Mills and Siemens, while a long build-up was seen in Nippon Life India Asset Management, Birlasoft and Persistent Systems.

Among individual stocks, a volume spike of more than 200 percent was seen in Alkem Laboratories, Indus Tower and Aditya Birla Capital.

On the BSE, more than 100 stocks touched their 52-week highs. These included TD Power Systems, Mahindra & Mahindra, Voltamp Transformers, Inox Leisure, FIEM Industries, Elgi Equipments, Deepak Fertilisers, CG Power and Adani Power.

Outlook for August 4

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas

The Nifty continued to inch higher along with the expanding daily upper Bollinger Band. After hovering near the 61.8 percent retracement of the entire decline from Oct 2021 to June 2022 (near 17,300) for the last couple of sessions, the index is stretching higher.

It is marginally away from its subsequent target of 17,500, which is 78.6 percent retracement of the April–June decline.

Once that is tested, the Nifty is expected to step into a short-term consolidation mode. The near-term support zone shifts higher to 17,150-17,200. Thus, short-term traders can hold on to the long position with reversal trailed to 17,150. However, they need to be very cautious about their exposure in the broader end of the market and need to reduce the exposure over there.

Shrikant Chouhan, Head, Equity Research (Retail), Kotak Securities

The bulls and the bears slugged it out in a volatile session but eventually, the bears ruled Dalal Street on buying in IT and select finance stocks. Even as FIIs resume buying, traders are taking a stock-specific approach ahead of the RBI’s rate decision on August 5.

On intraday charts, the Nifty formed a double bottom and a bullish candle on the daily charts, which is broadly positive.

We are of the view that 17,200 and 17,300 will be the key support zones for traders. As long as the index trades above them, the uptrend will continue and the index can move to 17,500-17,550.

For the trend-following and positional traders, 17,200 will be the sacrosanct support level.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.