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Informist, Wednesday, Jul 31, 2024

By Noel John

MUMBAI – Headline equity indices ended the day at record closing highs after being steady throughout the session. Investors held back from placing major bets ahead of the US Federal Open Market Committee's decision on interest rates later today. Domestic equity indices opened higher despite mixed cues from global peers, supported by strong inflows from retail investors, analysts said.

Today, the Nifty 50 and Sensex closed 0.4% higher each at 24951.15 points and 81741.34 points, respectively. The 50-stock index is expected to face immediate resistance at around 25000 points, while the immediate support is pegged at 24800 points. However, if the index breaks below the immediate support, 24500 points could act as the subsequent support, according to technical analysts at different broking firms. 

Market participants now expect the US Fed meeting outcome to provide hints on the market's direction in the coming session. The US central bank is expected to start cutting rates from September, according to market participants. "The gradual weakening of the US economy, especially in the labour markets, with the consistently soft inflation prints, has sharply increased the probability of the US Fed cutting rates. A cut in US rates may see higher EM (emerging markets) and India inflows," Kotak Institutional Equities said in its strategy report today. 

Shares of metal, pharmaceuticals, paints, and insurance companies were among the major gainers today. However, a fall in the shares of select banks, fast-moving consumer goods, and oil and gas companies capped the gains in the indices.

Shares of JSW Steel and Asian Paints were the top gainers in the Nifty 50 index. Maruti Suzuki India saw sharp gains in the final 10 minutes of trading after the company reported a strong June quarter earnings growth. 

Stocks of metal companies gained today, with the Nifty Metal index closing 1.2% higher, becoming the best-performing sectoral index. Investors expect metal stocks to gain in the coming sessions, tracking similar sentiments from the US market as the US Fed is widely expected to make optimistic remarks regarding the interest rate trajectory, Deven Mehata, a technical research analyst with Choice Broking, said. 

Investors are also expecting positive commentary from the managements of metal companies in the upcoming earnings, which is also aiding the rally, a research analyst who covers the sector in a domestic brokerage said. 

In the auto space, Maruti Suzuki shares rose sharply and hit a lifetime high of 13,375 rupees on the National Stock Exchange after the company's key earnings metrics for the June quarter were better than expected. Higher volumes, richer product mix, softening commodity prices and price hikes helped the company to report a 47% year-on-year increase in net profit to 36.50 bln rupees in Apr-Jun, surpassing analysts' average estimate of 32.51 bln rupees.

Shares of paint companies gained today as the crude oil prices on the Intercontinental Exchange fell for four straight sessions, to below $80 per barrel. Asian Paints, Berger Paints India and Indigo Paints were among the top performing paint company stocks. These stocks are rising after underperforming and trading in a range for nearly three years, Ajit Mishra, senior vice president of technical research at Religare Broking, said. Further, investors are likely positioning themselves ahead of the upcoming quarters, which are usually healthy for paint companies due to festivals, Mishra added. 

Oil prices fell in the previous three sessions as investors grew concerned over potential weakening demand from China, while the Organization of the Petroleum Exporting Countries and allies appeared set to maintain its plans to increase supply, Rahul Kalantri, vice president of commodities at Mehta Equities, said in a note today. However, at 1619 IST, the September futures contract of Brent Crude Oil traded on the intercontinental exchange rose over 2% to $80.4 per barrel. 

Insurance stocks, too, rose today, with those of HDFC Life Insurance Co and SBI Life Insurance Co becoming two of the major gainers in the Nifty 50 index. The insurance sector is seeing growth currently after it remained under penetrated for many years, Shreyansh V. Shah, research analyst at StoxBox, said. "Now, since the public, in general, have realised the necessity of having insurance, the growth is seen in terms of numbers. Also, the revision in premium prices has led to an increase in the companies' profitability," the analyst said. 

Further, Road Transport and Highways Minister Nitin Gadkari has reportedly requested Finance Minister Nirmala Sitharaman to remove the 18% goods and services tax on life and medical insurance premiums. Various media houses reported today that Gadkari, in a letter on Sunday, said that this tax hinders the sector's growth. 

Nifty Pharma was among the best performers today as it ended 1.1% higher. The sentiment around the sector was boosted as investors expect strong performance from pharma companies, driven by robust domestic growth, Deepika Murarka, lead analyst at Choice Broking, said. "Additionally, easing cost pressures in the US are anticipated to contribute to an expansion in operating margins," the analyst added. 

On the downside, shares of FMCG companies were the major laggards, with Britannia Industries and Tata Consumer Products being the two worst performers in the Nifty 50. Shares of Tata Consumer Products fell after the company's consolidated net profit for the June quarter came in below estimates. 

The broader market indices closed mixed today after hitting their lifetime highs. While the Nifty midcap indices ended higher, Nifty Smallcap indices witnessed profit bookings in the final hour and closed in the red. 

The Securities and Exchange Board of India's consultation paper on futures and options trading was also a point of discussion among investors today. Some of the regulator's proposals include changes to the strike price introduction methodology, making clearing corporations and exchanges monitor position limits on an intraday basis instead of at the end of the day, and revising the minimum contract size for index derivatives.

"SEBI's proposed measures to address the retail frenzy in F&O markets are designed to improve market stability. By reducing trading volumes in the F&O segment, these measures aim to decrease both daily and intraday volatility in Nifty, which is often heightened due to frequent expirations," Feroze Azeez, deputy chief executive officer at Anand Rathi Wealth, said in a note today. According to Anshul Jain, head of research at Lakshmishree Investment and Securities, SEBI's proposed measures are expected to mitigate excessive speculative trading and enhance market stability, although they may also impact trading volumes and the strategies of smaller traders. 

* Of the Nifty 50 stocks, 33 rose and 17 fell

* Of the Sensex stocks, 19 rose and 11 fell

* On the NSE, 1,444 stocks rose, 1,272 fell, and 73 were unchanged

* Nifty Metal: up 1.2%; Nifty Pharma: up 1.1%; Nifty PSU Bank: down 0.4%

BSE                                              NSE
Sensex: 81741.34, up 285.94 pts or 0.4%          Nifty 50: 24951.15, up 93.85 pts or 0.4%

End

US$1 = 83.72 rupees

Edited by Saji George Titus

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