Markets extend rally as metal stocks outperform; Sensex settles over 61k, Nifty above 18,165
4 min read 18 Jan 2023, 04:42 PM ISTThe slowdown in the FIIs selloff, coupled with stellar buying from domestic investors, major Q3 earnings, and budget expectations played a key role in lifting the markets. Metal and capital goods stocks outperformed, while PSU banks emerged as top laggards.
PremiumIndian markets extended their rally for a second consecutive day on Wednesday with Sensex regaining its psychological mark of 61,000 and Nifty 50 rising above 18,100 levels. The slowdown in the FIIs selloff, coupled with stellar buying from domestic investors, major Q3 earnings, and budget expectations played a key role in lifting the markets. Metal and capital goods stocks outperformed, while PSU banks emerged as top laggards. Also, the rupee too strengthened against the US dollar tracking Asian peers.
Sensex rose by 390.02 points or 0.64% to end at 61,045.74, while Nifty 50 climbed by 112.05 points or 0.62% to close at 18,165.35. In trading hours, the 30-scrip benchmark had touched an intraday high of 61,110.25 and the Nifty 50 an high of 18,183.75.
India's volatility index dropped by nearly 1.5%.
Vinod Nair, Head of Research at Geojit Financial Services said, "After the adverse performance during the last one and a half months, the Indian market has been advancing in the last 2-3 trading days. The trend is supported by the marginal improvement in FIIs inflows and the upside in domestic investments. The domestic investors are adopting buy on dip strategy."
Nifty PSU Bank stocks were the top bears as the index tumbled by 1.25%. However, Bank Nifty gained 223 points driven by private banks. BSE Bankex as well soared around 242 points.
But metals and capital goods stocks were top bulls. On BSE, the metal index skyrocketed by 519.46 points or 2.44%, while the Capital Goods index zoomed by 503.16 points or 1.46 points.
Except for auto, oil & gas, and PSU banks, all other sectoral indices were in the green.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said, "The benchmark indices continued positive momentum second day in a row, the nifty ends 112 points higher while the Sensex was up by 390 points. Among Sectors, the Metal index bounce back sharply, rallied over 1.75 percent whereas despite strong momentum profit booking continued in PSU Bank index."
Also, Ajit Mishra, VP - of Technical Research, Religare Broking explained in detail that markets extended rebound and gained over half a percent amid mixed cues. After the flat start, continued buying in select index majors from banking, IT, and capital goods space pushed the index higher. Finally, it settled around the day’s high to close at 18165.35 levels. Meanwhile, the market breadth was aligned marginally towards the advancing side, thanks to the recovery in the midcap space while the smallcap index ended unchanged.
Stocks like Tata Steel, L&T, Wipro, HDFC Bank, HDFC, Bharti Airtel, and NTPC were big winners with upside ranging from 1% to 3%. On the other hand, stocks like Tata Motors and Ultratech Cement took the most beating with down between 1-2%. IndusInd Bank, Nestle, and Bajaj Finserv also were in the red.
On Wednesday, FIIs sold ₹319.23 crore, while DIIs bought a whopping ₹1,225.96 crore in Indian stocks. After 17 consecutive days of selling bias, FIIs were net buyers on Tuesday with inflows to the tune of ₹211.06 crore. This week, there has been a significant slowdown in FIIs outflow from Indian markets.
Further, at the interbank forex market, the rupee strengthened on Wednesday against the US dollar after two consecutive days of drop. The local unit settled at 81.24 per dollar compared to Tuesday's closing of 81.76 per dollar. Rupee gained today tracking the upside in other Asian currencies as dollars witnessed a pullback. Also, the rupee forward premiums which has a 1-year implied yield gained to a two-month high at 2.35%.
Going ahead, Mishra said, "We expect the recovery to extend further as Nifty has surpassed the immediate hurdle at the 18100 mark. However, the upside seems capped citing restricted participation and hurdles around the 18250-18350 zone. We thus recommend staying selective and suggest preferring index majors over others."
In technical terms, Chouhan said, the market continued positive momentum and after a long time, the index succeeds to close above the 20-day SMA (Simple Moving Average) which is broadly positive. However, 18250/61300 levels for Nifty and Sensex could act as a profit-booking zone for trend-following traders. He added, "we are of the view that, as long as the index is trading above 18050/60700 or 20-day SMA. The texture of the chart suggests positive sentiment is likely to continue in the near future. Above 18050/60700, the index could move up to 18250/61300 further upside may also continue which could lift the market till 18300/61500 or 50-day SMA. On the flip side, below 18050/60700 uptrends would be vulnerable."
According to S Hariharan, Head Institutional Equity Sales, Emkay Global Financial Services, the earnings season thus far has met or beat expectations – however, individual stocks reporting results have not reacted favourably to good results. This reflects a consensus state of positioning and points to a period of digesting gains at the headline index level. The other notable feature of market action over the first half of Jan has been muted market volumes, despite elevated institutional activity – FIIs have been net sellers worth $2.5 bn in Jan so far, which has been set off by DII net buying.
Adding Hariharan said, the retail segment is conspicuous by its absence in market action and is a slightly concerning factor for overall market conditions. A reopening of the Chinese economy is understandably attracting the most institutional attention and as a result, expensive valuations in India have acted as a major factor in the propensity for FIIs to be net sellers – this is expected to continue in the near-term, and would be an overhang for Financials sector.
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