Thursday’s session saw a cautiously optimistic tone prevailing in the Indian stock market due to the factors of good company performance, favorable monetary policies by the RBI, and international geopolitics. The leading indices were trading range-bound on account of derivatives expiration, but stocks’ specific activities dominated the trading session.
BSE Sensex was quoting at around 78,722, moving upwards by about 0.18%, while NSE Nifty 50 was hovering close to 24,635, rising about 0.04%. Even though the headline indexes showed little to no change, there was robust activity in the broader markets, with some mid and small-cap stocks performing well. Market analysts observed that investors were cautious due to volatility associated with weekly expiry and new closing price methodology for Sensex derivatives.
The primary reason behind the positive sentiment in the market was the hope and expectations about the monetary policy decision made by the Reserve Bank of India. The RBI kept the repo rate unchanged but once again reiterated its determination towards the control of inflation and the growth of the economy. The policy was interpreted positively for the economy, which allowed banking and financial stocks to be relatively stable.
Global trends have had an impact on domestic markets as well. News of progress in the diplomatic talks between the US and Iran helped boost investors’ morale across the world. The easing of geopolitical tensions would help to bring stability to the price of crude oil, which would be favorable for India as the country depends on imports for most of its energy needs.
Earnings from companies were responsible for the specific movement in their stocks. Those companies which reported profits exceeding market expectations witnessed good buying interest in their stocks. Navin Fluorine Industries saw an impressive gain after the announcement that its profit for the quarter ending June had more than doubled. In the same way, Neuland Laboratories also made impressive gains following an increase in their quarterly profit.
While the general market beat benchmark indices, the small-cap index marked a new high, while the mid-cap index continued its upward trajectory. Investors were still bullish about the quality mid-sized companies that have good earnings potential. But analysts sounded a note of caution as valuations of some sectors have become too high due to the rally recently witnessed. The selective stock-picking approach should be adopted instead of a general one.
The overall market performed better than benchmark indices as the small cap index made a new record peak while the mid cap index made further gains. There were positive expectations about quality mid cap companies whose earning prospects had improved. But at the same time caution was recommended as the valuations of some sectors have become expensive due to the recent rise in the market.
The sector-wise performance saw a varied trend during the entire trading session. Even though most of the sectors experienced some level of profit booking, the stocks of banks and finance companies were relatively strong. There was some pressure on IT stocks on account of weak performance of international technology stocks. The performance of pharmaceutical companies saw a stock-specific trend based on their performance results.
Market analysts feel that market volatility is likely to remain on the higher side for the coming period, taking into consideration the derivative expiries and earnings reports. Foreign institutional investor (FII) actions are another factor being considered by the market players. Further FII buying could help Indian equities, but risk-off conditions could lead to corrections in the short run.
A number of economic parameters which will be released in the coming months include inflation figures, industrial production figures, and comments from global central banks. These will affect the perception about future rates and economic growth. Commodity prices, particularly oil prices, are also being monitored by investors since they play a major role in the inflation and earning picture of India.
Of the stockbroker advice for today’s stock recommendations, there are some stocks that have been recommended by the analysts for investors to watch out for due to both technical and fundamental analysis. But it is important for people to conduct their own research before investing in any stock.
In terms of technicals, experts are of the view that the Nifty is consolidating after its upturn. It can be observed that the crossing of resistance levels by the index can lead to further buying, whereas the crossing of support levels by the index can attract bargain hunters amid profit-taking. The Nifty can be expected to remain volatile in the upcoming sessions.
On the whole, there appears to be some optimism in the market today. Positive corporate earnings, favorable monetary policy, improved global sentiment, and robust domestic economic factors are all continuing to aid the Indian markets. However, the approaching expiry of derivatives, the presence of various global risks, and somewhat overvalued stocks in certain segments mean that there needs to be some discipline from the investors’ end. Long-term investors may continue to look out for fundamentally sound companies instead of getting carried away by market movements. In light of the ongoing earnings season and upcoming macro events, the Indian markets will continue to be active.
