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Informist, Monday, Jul 15, 2024

By Alina Geogy and Anjana Therese Antony

MUMBAI – The domestic benchmark equity indices are expected to move higher on Tuesday. Analysts said they are positive on the market and expect further upmove on likelihood of modest June quarter earnings and a favourable Union Budget. Investors will also eye the Apr-Jun earnings of automotive manufacturer Bajaj Auto, due on Tuesday. Meanwhile, the equity markets will be shut Wednesday on account of Muharram.

The Nifty 50 hit a record high for the second consecutive session today. It hit a lifetime intraday high of 24635.05 points and ended 0.4% higher at its all-time closing high of 24586.70 points. The Sensex ended 0.2% higher at its record closing high of 80664.86 points. 

Analysts are positive on shares of auto and automobile ancillary makers, and expect Bajaj Auto to report strong earnings for the June quarter. The Pune-based company's net profit is expected to grow by slightly over 17% on year to 19.53 bln rupees in Apr-Jun, aided by higher sales volume, an increased share of high-margin products, price hikes, and lower raw material prices, according to brokerage reports. 

However, there are concerns about whether the automaker's stock price could see gains in case of a strong result as its valuation remains expensive. In the previous quarter, the stock had fallen despite strong earnings, which analysts attributed to the expensive valuation. They had then said that the market had factored in most of the positives of the company and may give muted returns during the current financial year. 

Among others scheduled to release their quarterly earnings are Zee Entertainment Enterprises, Alok Industries, and TV18 Broadcast.

Meanwhile, banking stocks are expected to gain further momentum in the next session. Investors would look to move to banking stocks from the IT pack, Prashant Tapse, senior vice-president of research at Mehta Equities, said. Of banking stocks, the state-owned banks such as State Bank of India, are likely to outperform their sectoral peers. 

Today, the Nifty PSU Bank was the best performer among sectoral indices. The Nifty Bank ended at 52455.90 points today. A buy-on-dips strategy should be adopted in the Nifty Bank index, as long as the index holds above 51750 points, Hrishikesh Yedve, assistant vice-president of technical and derivatives research at Asit C. Mehta Investment Intermediates, said in a post-market note.

Among oil stocks, Oil and Natural Gas Corp and Hindustan Petroleum are expected to perform well in the upcoming sessions as these stocks are having breakouts after consolidation for an extended duration. Robust US consumption in the summer and increasing bets of interest rate cuts in September would help oil prices traded on the New York Mercantile Exchange remain above the $79 mark, ICICI Direct Research said in an outlook report today. Meanwhile, investors await the quarterly earnings of Reliance Industries and Bharat Petroleum Corp, scheduled for release on Friday. 

On the other hand, analysts said investors should have a cautious approach towards information technology stocks and expect these shares to move sideways or consolidate in the next session. The sector needs a breather after the sharp gains in the previous sessions, especially following renewed hopes of better financial performance in the coming quarters, they said. Shares of Tata Consultancy Services and HCL Technologies had gained sharply after posting improved earnings in the June quarter. TCS' consolidated net profit during the quarter was largely in line with analysts' estimates, while HCL Technologies beat the market expectation on net profit. 

Shares of fast-moving consumer goods and pharmaceutical companies are expected to continue gaining in the near-term. Concerns about expensive valuations and profit-booking are making the defensive pack more appealing, analysts said. Further, hopes of healthy monsoons and improvement in the rural economy will likely help the fast-moving consumer goods companies.

On the Budget front, there is hope of favourable allocations to various sectors and good reform-oriented schemes. These are expected to help stocks of budget-linked companies, such as state-owned and railway-related firms, gain in the run ahead of the budget. The new government under Narendra Modi is widely expected to continue its earlier agendas, while giving some more focus on the rural front. "We expect the Union Budget in July to provide a combination of higher capex targets, higher allocation to the rural and agricultural sectors, and further fiscal consolidation – without shifting away from the existing prudent fiscal policy framework," Kotak Institutional Equities recently said in its strategy report.

On the global front, investors will monitor news regarding the meeting of the Board of Governors of the US central bank, due to be held later today. "Global cues will also dictate trends, and investors would be watchful of geopolitical tensions and the Fed's (US Federal Reserve's) statement on rate cuts", Tapse said in a note. 

Last week, Fed Chair Jerome Powell hinted that the US central bank was closer to cutting interest rates. He had highlighted the cooling US labour market, which had earlier remained resilient, and said keeping interest rates high for too long could risk further economic growth. These comments come after the Fed chairperson on multiple occasions reiterated that the apex bank will not cut rates until inflation falls and stabilises at its target of 2%. 

Investors in the US may react to the news about the failed assassination attempt on former President of the US Donald Trump on Saturday. The attempt came amid speculation about his chances of winning the US elections in November.  End

US$1 = 83.59 rupees

Edited by Deepshikha Bhardwaj

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