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Informist, Wednesday, Aug 21, 2024

By Noel John

MUMBAI – Benchmark indices ended higher today after a volatile session as shares of insurance, pharmaceuticals, and fast-moving consumer goods companies gained. The Nifty 50 index closed in the green for the fifth straight session. After opening lower on weak global cues, investors struggled to find direction throughout the session owing to lack of domestic triggers, analysts said. While shares of insurance and select financial services companies rose, those of select banks fell ahead of the weekly expiry of Nifty Bank's derivative contracts.

The Nifty 50 has recouped all the losses suffered in the sell-off on Aug 5, following the fall in global markets due to worries about a likely recession in the US and unwinding of yen carry trades. The 50-share index ended 0.3% higher at 24770.20 points and the Sensex ended 0.1% higher at 80905.30 points. The 50-stock index is expected to find resistance at 25000 points, and support at 24400 points.

The market saw a continuation of stock-specific activity and sector rotation, Sunny Agrawal, head of fundamental equity research at SBI Securities, said. Investors will now take cues from the minutes of the US Federal Open Market Committee meeting that will be released later today and the US employment data scheduled on Thursday, Agrawal added.

While July was very strong for Indian equities, August has been quite challenging so far due to both macroeconomic as well as microeconomic factors, Naveen Kulkarni, chief investment officer at Axis Securities, said in a note today. "The recent correction in the equity markets is helpful and some more correction will be very healthy," Kulkarni said. While macroeconomic challenges are emerging, the possibility of interest rates trending lower over the next two to four quarters will be a net positive for economic growth, Kulkarni added.

"There was fear of US getting into recession, that is kind of reduced now," said Krishna Appala, senior research analyst at a portfolio management services firm Capitalmind Research. He said likely interest rate cuts later this year may provide a trigger for inflows into emerging markets and better earnings growth in global-facing sectors such as information technology, which could give further push to overall equity markets.

Shares of pharmaceutical companies were among the major gainers. Liquidity tends to move to defensive bets during a phase of volatility, which triggered buying in these stocks today, Kranthi Bathini, director of equity strategy at WealthMills Securities, said. Shares of Divi's Laboratories, Cipla, Granules India, and Dr Reddy's Laboratories were among the major gainers in the index. 

Divi's Laboratories ended 3.8% higher and was the top gainer in the Nifty 50 index. The stock rose following a Bloomberg report that a US court has stayed the US Food and Drugs Administration's approval to MSN Laboratories for a generic of Novartis AG's heart failure drug.

The stay means that a generic of the drug won't come out in the market any time soon, which is good for Divi's Laboratories, which supplies to Novartis, Param Desai, research analyst with brokerage firm Prabhudas Lilladher, said.

Last week, Novartis failed to convince a Delaware federal court to block generic drugmaker MSN Pharmaceuticals from launching its own version of Novartis' heart-failure drug Entresto. Shares of Divi's Lab fell more than 4% after this development as the company supplies Entresto to Novartis as part of its contract development and manufacturing organisation operations.

Shares of insurance and FMCG companies were also among the major gainers, which helped the indices to end in the green. SBI Life Insurance, HDFC Life Insurance, Hindustan Unilever, and Nestle India were among the top gainers in the Nifty 50 index.

The sentiment towards FMCG companies has improved as most of the major players expect an uptick in sales going forward, owing to recovery in rural consumption, a good monsoon, and the upcoming festival season, Onkar Kelji, research analyst at IndSec Securities, said. Companies had raised product prices in the previous quarters owing to higher commodity prices, Kelji said, adding that since the commodity prices have moderated, they have passed on the benefit to customers.

However, moderation in inflation has led to a strong return for local players, which has increased competition for listed majors, Kelji said. Now these companies are focussing on volume growth, which is also reflected in their higher advertisement spending, he said.

"...factors like higher government spending, a favourable monsoon, and an upcoming strong festive season are expected to further drive rural demand in the coming quarters. However, the increasing competitive intensity from smaller and regional players requires careful monitoring," Axis Securities said in a research report today.

On the downside, shares of select banking and information technology companies fell. Shares of Tech Mahindra, HCLTech, HDFC Bank, and State Bank of India were among the worst performers in the Nifty 50 index. 

The June quarter earnings of banks were a little weaker than expectations with challenges emerging on credit costs, said Kulkarni of Axis Securities. "The slight rise in credit costs surprised the market and the sector has been witnessing de-rating post the earnings season," Kulkarni said.

Looking ahead, growth should pick up gradually going into the festival season after above-average monsoons, and the margin trajectory should improve for most lenders as the repricing of borrowings is largely done, Emkay Global said in a report today. "Further, increasing asset yields should aid margins and eventually the rate-cut cycle should accelerate margin expansion," the brokerage added.

Shares of ICICI Securities ended more than 7% lower after the Mumbai bench of the National Company Law Tribunal approved its delisting plans and rejected the objections raised by certain minority shareholders. On Aug 5, a bench comprising judicial member Virendrasingh Bisht and technical member Prabhat Kumar had reserved its order in the case. A detailed order is awaited.

* Of the Nifty 50 stocks, 37 rose and 13 fell

* Of the Sensex stocks, 17 rose and 13 fell

* On the NSE, 1,806 stocks rose, 931 fell, and 59 were unchanged

* On the BSE, 2,607 stocks rose, 1,345 fell, and 86 were unchanged

* Nifty Consumer Durables: up 1.4%; Nifty FMCG: up 1.4%; Nifty Realty: down 1.3%

BSE                                               NSE
Sensex: 80905.30, up 102.44 pts or 0.1%           Nifty 50: 24770.20, up 71.35 pts or 0.3%

End

Edited by Aditya Sakorkar

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