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Informist, Friday, Jul 26, 2024

By Alina Geogy

MUMBAI – A surge in most banking and financial services stocks helped the market recoup all losses of the week and drive the benchmark indices higher today. A few analysts said they were certain that foreign investors, who were net sellers in the last three sessions, had turned buyers.

Strong June quarter earnings of major companies, rise in liquidity, fading worries over changes in taxation in the Union Budget, and shift in investor focus to global developments were among the other factors that supported the indices, analysts said.

Shriram Finance surged 9% and was the top gainer among the Nifty 50 stocks. The stock hit an upper circuit during the day after the company reported an improvement in its asset quality in the Apr-Jun quarter. The non-bank lender's gross non-performing asset ratio fell to 5.39% as of Jun 30 from 5.45% a quarter ago.

The Nifty 50 hit record intraday as well as closing highs. The index ended at a record closing high of 24834.85 points, up 428.75 points or 1.8% from Thursday. During the day, the index hit a new record high of 24861.15 points. The BSE Sensex closed 1,292.92 points or 1.6% higher at 81332.72 points.

Rising liquidity in the market refuses to let the benchmark indices languish in the negative for too long, analysts said. Though there were negative sentiments in the market over the upward revision in capital gains tax, investors have now accepted it and are moving ahead, Amish Shah, research analyst at Taurus Corporate Advisory Services, said. Companies have reported good earnings of late, which is driving the rally, he said.

The indices of information technology, automobile, healthcare, pharmaceuticals, and fast-moving consumer goods sectors hit record highs. The broad market also joined the upward journey, with the mid-cap indices outperforming the headline indices.

However, shares of some private banks were muted. Investors are pulling out money from banking stocks due to concerns over their liquidity coverage ratio, a head of research with a brokerage house said. The Reserve Bank of India's draft norms on management of liquidity coverage ratio, which is expected to increase credit costs of banks and put pressure on their margins, officials from bank treasuries had told Informist. The guidelines were released on Thursday after close of the market.

About 75% of the positions of foreign institutional investors in index futures are long, while the remaining are short, Shah of Taurus Corporate Advisory Services, said. This indicates the increasing bullish sentiment that FIIs have towards the domestic equity market, he said. However, there is still some weakness in select heavyweight stocks such as HDFC Bank and Reliance Industries, which indicates that a major upmove in the Nifty 50 is not to be expected in the near term, he said.

Shares of LTIMindtree and Wipro closed over 3% higher each and gains in the IT pack pushed the Nifty 50 index higher by 0.3%. Shares of Mphasis ended 6.5% higher after the company reported a sequential growth in its June quarter earnings, driven by new deal wins and growth in its banking and financial services segment.

After major companies in the IT sector reported strong earnings growth in Apr-Jun, investors are finding them appealing, analysts said. Signs of improvement in the demand environment, with hiring and deal wins picking up, and the likelihood of a rate cut by the US Federal Reserve are also boosting sentiment for this sector, a research analyst at a domestic brokerage firm said.

In the defensive pack, analysts said that pharmaceutical stocks are being preferred over fast-moving consumer goods, as recent earnings by FMCG companies were not in line with estimates. For pharma companies, signs of a pick-up in their US business, strong earnings from major drugmakers, and growing sales across key global markets are helping the sector, analysts said. Divi's Laboratories and Cipla were among the top gainers in the Nifty 50 today.

Among other stocks, One97 Communications hit a 10% upper circuit and was the top gainer in the Nifty 200 index after a Reuters report said the government has approved Paytm's investment proposal in its payment aggregator business.

On the other hand, shares of Cyient ended 5.5% lower after declining as much as 9% earlier in the day to a one-month low after disappointing June quarter earnings and a sharp cut in revenue growth guidance for 2024-25 (Apr-Mar). The broad-based decline across the company's verticals raises uncertainty about its growth recovery path, Nuvama Institutional Equities said in a report.

* Of the Nifty 50 stocks, 48 rose and 2 fell

* Of the Sensex stocks, 29 rose and 1 fell

* On the NSE, 1,834 stocks rose, 855 fell, and 86 were unchanged

* On the BSE, 2,595 stocks rose, 1,354 fell, and 91 were unchanged

* Nifty Metal: up 3%; Nifty Healthcare: up 2.7%; Nifty Oil & Gas: up 0.4%

BSE                                             NSE
Sensex: 81332.72, up 1292.92 pts or 1.6%        Nifty 50: 24834.85, up 428.75 pts or 1.8%

End

Edited by Ashish Shirke

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