Benchmark stock indices Sensex and Nifty recovered on Tuesday, as investors judged the recent correction as excessive. Markets across mainland China, Korea and Hong Kong climbed in early trade, aiding the domestic sentiment.
Sensex climbed 437.73 points or 0.57 per cent to 76,767.74. Nifty stood at 23,219.55, up 133.60 points or 0.58 per cent. In the broader market, every two stocks advanced for even one that declined.
“It appears that the market is a bit oversold and this favours a bounce back in the near-term. But that trend, if it plays out, is unlikely to sustain. There is more pain likely in mid and small caps,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The US 10-year bond yield eased a bit, but the dollar kept trading near its highest in more than two years, ahead of CPI data scheduled for later this week. Brent crude oil prices edged lower.
Vijayakumar said there is a message from the institutional activity in the market. “Yesterday, DII buying was Rs 3,174 crore higher than FII selling. This means that smart money like HNIs are also selling in the market. The FII strategy of continuously adding to short positions this month has been successful. The sensible option for retail investors is to buy beaten down quality largecaps and wait patiently,” he said.
NTPC surged 3.44 per cent to Rs 308.50 and was the top Sensex gainer. IndusInd Bank, Zomato Ltd, Tata Motors Ltd and Adani Ports climbed over 3 per cent each. Bajaj Finance, State Bank of India, Tata Steel and Bajaj Finserv added up to 2.2 per cent.
IT stocks fell. HCL Technologies declined 7.84 per cent to Rs 1,829.65. The IT firm narrowed its FY25 revenue guidance. Analysts said the hurdle rate for HCL Tech to now re-rate is higher than its peers, given it has achieved valuation parity with large peers such as TCS and Infosys. The slower ramp-up of discretionary deals in Q4 is a dampener, they said.
The HCL Tech’s commentary dragged Tech Mahindra (1 per cent), TCS (down 0.6 per cent) and Infosys (down 0.6 per cent).
“Given the prevailing volatility, traders are advised to exercise caution, implement strict stop-loss measures, and avoid carrying long positions overnight to manage risk effectively,” said Hardik Matalia, Derivative analyst at Choice Broking.
RBI rate cuts ahead?
Meanwhile, headline inflation for December moderated to 5.22 per cent YoY in India, primarily due to easing food prices, especially for vegetables, fruits, meat, and pulses.
“We do not rule out a cut in Feb-25, but would be more comfortable taking a firm call closer to the policy window, especially with a new Governor and MPC in place. We also keep a watch on unconventional easing measures, specifically the gradual easing of regulatory lending norms ahead, to revive the waning credit offtake,” Emkay Global said.
Union Budget 2025 expectations
Nilesh Shah, MD at Kotak Mahindra AMC said the Budget is coming as the world moves from globalisation to protectionism, and tariffs are becoming an important part of the policy.
“It needs to be growth-oriented, with support for urban consumption through tax cuts, a subvention for the EMI burden at the low and middle end of the pyramid, and incentives for private investment. The budget can’t afford to deviate from the path of fiscal prudence it has charted, as conservative management of the economy has differentiated us. Divestment, including strategic divestment of non-core PSUs, will help bridge the fiscal gap,” Shah said.
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