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Informist, Wednesday, Aug 14, 2024

By Alina Geogy

MUMBAI – Benchmark indices ended largely unchanged today, capping a day which had multiple triggers for the market. Information technology stocks were major gainers after the latest US data reinforced expectations that the US Federal Reserve would start cutting interest rates at its next meeting in September. However, these gains were offset by losses in select mining, automotive, and pharmaceutical stocks after some negative news, including on the earnings front.

With a holiday on Thursday and more macroeconomic data scheduled from the US, investors are likely pausing before taking any fresh positions, Amish Shah, research analyst at Taurus Corporate Advisory Services, said. There is a possibility that traders will lighten their positions before the weekend, he said. Trading was mixed today amid corporate earnings announcements and a Supreme Court verdict on mining taxes, he said.

The Nifty 50 ended flat at 24143.75 points, while the Sensex ended 0.2% higher at 79105.88 points. The weekly derivatives contracts of both the Nifty 50 and Nifty Bank expired today, yet there wasn't much volatility in the market as was expected.

Investors were slightly cautious as this is a truncated trading week, analysts said. Indian financial markets are shut Thursday on account of Independence Day.

Dharmesh Shah, assistant vice president technical analyst at ICICI Securities, said it was a lacklustre day with the Nifty 50 moving in a tight range. The market is also cautious ahead of US inflation data, he said. Consumer price index data for July from the US is due later today.

Indices were choppy early in the day and struggled to find direction for the first half of the session, but IT stocks extended early gains and helped the indices gain slightly around afternoon. The IT sector gained as the US producer price index data, released late Tuesday, was lower than expected. Producer prices rose by 0.1% in July on month, less than the 0.2% expected by analysts in The Wall Street Journal's poll. This data was welcomed by investors as it raised the chances of the US Federal Reserve cutting interest rates at its September meeting.

The information technology sector is expected to benefit from a rate cut in the US as a significant amount of its business comes from that country. Information technology stocks rose tracking the overnight gains in Nasdaq Composite index, said Shah of Taurus Corporate Advisory Services. The technology-heavy index ended 2.4% higher on Tuesday, rising for the fourth day in a row.

The Nifty IT was the top gainer among sectoral indices. The index closed 1.6% higher with all 10 constituents ending in the green. Shares of Tata Consultancy Services, HCL Technologies, Infosys, and Tech Mahindra ended higher by 1.4-2.3% and were the top gainers among Nifty 50 stocks.

On the other hand, several mining stocks fell after the Supreme Court's verdict that state governments can collect taxes on mineral-bearing land from the Centre and mining companies with a retrospective effect from 2005, analysts said. The court, however, said state governments would not be able to charge penalty and interest on taxes for past periods. Shares of Coal India, NMDC, MMTC fell after the verdict, which came early in the day, and ended 3-6% lower. Coal India fell more than 3% and was the third worst-hit in the Nifty 50.

The court order follows a judgement last month in which the apex court had upheld states' power to levy tax on mineral rights and mineral-bearing lands.

Metal and mining stocks fell after the Supreme Court order and dragged the Nifty Metal index down more than 1%, making it the worst-hit among sectoral indices. Tata Steel has already accounted for 170 bln rupees as a contingent liability for such tax payments, Vikram Kasat, head advisory at Prabhudas Lilladher, said in a note. However, Steel Authority of India and NMDC are likely to be affected the most, with potential dues estimated at 46 bln rupees and 62 bln rupees respectively, Kasat said. This ruling could also affect cement companies, he said.

Shares of Divi's Laboratories were also a major drag on the Nifty 50 after its Switzerland-based client Novartis lost a bid to stop MSN Pharmaceuticals from launching a generic of Novartis' heart drug Entresto, according to a US court ruling earlier this week. Divi's Laboratories may be affected by this setback as it supplies the Entresto drug to Novartis as part of its contract development and manufacturing organisation operations. The stock ended over 4% down and was the worst-hit in the Nifty 50.

Shares of another Nifty 50 constituent, Hero MotoCorp, fell over 3% after the automobile manufacturer reported a net profit for Apr-Jun that was slightly below analysts' estimates. Post market hours Tuesday, the company had reported strong growth in both net profit and revenue for the quarter aided by higher despatches, richer product mix, higher average selling price, and a moderation in commodity prices. Hero MotoCorp's operating performance for the quarter missed estimates mainly due to lower-than-expected improvement in realisation, Motilal Oswal Financial Services said in a report.

Investors also reacted to the June quarter earnings of some other companies such as Apollo Hospitals Enterprise, Mazagon Dock Shipbuilders, SJVN, HEG, and Piramal Enterprises, which were released after market hours Tuesday. Shares of Apollo Hospitals rose over 4% to a five-month high earlier in the day but they ended slightly lower. The company gave optimistic commentary on prospects for margin growth a day after reporting strong June quarter earnings. Shares of SJVN ended nearly 4% higher after the company reported an over 21% on-year rise in net profit for Apr-Jun.

Shares of Mazagon Dock rose sharply after the company posted higher consolidated net profit and revenue for the June quarter. On the other hand, shares of Piramal Enterprises and HEG fell over 10% and nearly 8%, respectively, after both companies posted weak earnings for Apr-Jun.

Over 40% of the stocks traded on the National Stock Exchange ended lower, while around 40% ended higher. The broader indices underperformed the benchmark indices. The Nifty Midcap 50 ended 0.8% lower and was the worst-hit broader market index.

* Of the Nifty 50 stocks, 23 rose and 27 fell

* Of the Sensex stocks, 15 rose and 15 fell

* On the NSE, 1,073 stocks rose, 1,644 fell, and 81 were unchanged

* On the BSE, 1,442 stocks rose, 2,485 fell, and 109 were unchanged

* Nifty IT: up 1.6%; Nifty Consumer Durables: up 0.1%; Nifty Metal: down 1.3%

BSE                                               NSE
Sensex: 79105.88, up 149.85 pts or 0.2%           Nifty 50: 24139, up 4.75 pts

End

Edited by Ashish Shirke

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