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Informist, Monday, Jul 29, 2024

By Alina Geogy

MUMBAI – The benchmark indices are expected to make more gains on Tuesday, which may take the Nifty 50 beyond its crucial psychological level of 25000 points, analysts said. However, the market may be susceptible to some bouts of profit-taking, similar to what was seen today, analysts said.

Also, investors will shift their focus to the monetary policy meeting of the US Federal Reserve, which starts Tuesday and the outcome of which is scheduled for Wednesday. The meeting is expected to provide hints on the likely interest rate path of the central bank. The outcome of the Federal Open Market Committee meeting gains prominence as investors keep their fingers crossed about when the apex bank will start cutting rates this year. It is widely expected that the US Fed will start trimming rates from September.

Back home, there are also views that the domestic market could continue seeing selling for profits. The benchmark indices are in uncharted territory and will head higher from current levels, Arpan Shah, senior research analyst at Monarch Networth Capital, said. "It may be difficult to make money at these levels and profit booking can be expected," he said.

The Nifty 50 is expected to face immediate resistance at 25000 points, while it will find support at 24500 points. The benchmark equity indices hit their record intraday as well as closing highs and were largely unchanged compared to the previous day. The Nifty 50 was a quarter of a point away from the 25000 level.

The Nifty 50 and Sensex closed at 24836.10 points and 81355.84 points, respectively. The fear gauge, India VIX, rose today, indicating concerns among market participants. The volatility index ended nearly 6% higher at 12.9450 points after closing lower in the previous session.

Banking stocks, which were underperforming of late, are expected to pick up and support the gains in the overall market because of an improvement in sentiment towards the sector. ICICI Bank reported in-line results for the quarter, and negative sentiments owing to the Reserve Bank of India's draft guidelines related to liquidity coverage ratio have also faded now. Last week, the central bank had released draft norms on the management of liquidity coverage ratio, which gave rise to concerns that credit costs of banks would increase, which may lead to pressure on their margins. 

On the earnings front, ICICI Bank on Saturday reported strong earnings for Apr-Jun, with net profit rising nearly 15% on year due to steady loan growth and a sharp rise in other income. The bank's net profit of 110.59 bln rupees for the quarter beat analysts' expectation of 106.04 bln rupees. 

ICICI Bank is one of the few banks that reported improvement in asset quality, loan-to-deposit ratio, and net interest margins. This was seen as a positive sign by market participants, who saw other sectoral peers such as IndusInd Bank and Axis Bank struggling from a deteriorating asset quality and a rise in provisions and the gross non-performing asset ratio. Today, the stock rose nearly 3% before closing off highs.

Further, the June quarter earnings of Tata Consumer Products is due Tuesday. The fast-moving consumer goods company's consolidated net profit for Apr-Jun is expected to rise over 15% on-year and consolidated revenue is likely to grow nearly 17%.

Among other sectoral players were railway and defence companies, which gained sharply. Analysts said these stocks are expected to extend their northward journey in the upcoming sessions. Shipbuilding stocks are expected to rise more because of their strong fundamentals and favourable technical indicators, Vinay Malasi, technical analyst at Khandwala Securities, said. Stocks such as Cochin Shipyard are poised for an upside momentum of 10-20% within the next month, he said. Malasi expects some green energy stocks, such as Inox Wind and Olectra Greentech, to gain similarly.  End

Edited by Tanima Banerjee

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