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Informist, Tuesday, Aug 27, 2024

By Alina Geogy

MUMBAI – The Nifty 50 is expected to test its all-time high again on Wednesday, extending a rally that has seen the benchmark gain for nine sessions in a row. Analysts said the risk appetite high on positive cues from global markets, anticipation of a rate cut by the US Federal Reserve in September, foreign fund inflows, and strong participation from domestic investors.

Today, the Nifty 50 rose to an intraday high of 25073.10 points, just 5 points away from its all-time high of 25078.30 points. The index ended the session marginally up at a record closing high of 25017.75 points.

However, the index closed off its high due to some profit-booking in the last one hour of trade. The 50-stock index is now expected to face resistance at 25100-25500 points and find support at 24750–24500 points. The Sensex ended marginally higher at 81711.76 points.

"Markets are optimistic about the US Fed policy rate cut following Jerome Powell's supportive comments and the Federal Reserve's confidence in achieving its 2% inflation target," Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, said in a note. Further, buying by foreign institutional investors over last three days has bolstered sentiment, he said. Khemka expects the ongoing uptrend in the Nifty 50 index and the broader markets to continue.

Foreign investors have also bought index futures over the last few sessions as they roll over positions to the September series, suggesting that they are bullish, derivatives analysts said. This comes ahead of the expiry of the August derivatives series on Thursday.

Information technology companies are expected to be the biggest beneficiary of a potential rate cut by the US Fed and their shares have been rallying for the past two weeks because of these rate cut hopes, noted analysts. Information technology stocks have even seen rollover of long positions, they said.

Large-cap IT stocks have rallied significantly in recent days and are overvalued, but mid-cap stocks in this sector still have room for trading opportunity, a research analyst covering the sector at a domestic brokerage firm said. The Nifty IT ended 0.1% higher, up for the second day. It has risen 2.1% so far this month.

Oil and gas stocks will be in focus amid rising crude oil prices due to worries that the ongoing crisis in West Asia might escalate. Shares of oil marketing companies are expected to take a hit, while those of upstream oil companies may continue to rise. On the Intercontinental Exchange, Brent crude oil futures were at $81.05 per barrel, down 0.5%. Brent crude oil futures rose sharply Monday on reports of missile attacks between Israel and Lebanon-based militant group Hezbollah over the weekend.

Analysts have a neutral to positive view on oil marketing companies. These companies had reported on-year decline in key earnings metrics for Apr-Jun, but the September quarter is expected to be better as gross margins of these companies are likely to improve. The Nifty Oil & Gas index ended flat today. Fall in shares of oil marketing companies such as Hindustan Petroleum Corp and Bharat Petroleum Corp, which extended losses from Monday, were offset by gains in those of Oil India and Oil and Natural Gas Corp, which rose again today.

Goldman Sachs Monday lowered the expected trading range for Brent crude oil prices to $70-$85 per bbl, Investing.com reported. This revision marks a $5 per bbl reduction from previous estimates and is driven by several key factors, including unexpectedly high inventories of the Organisation for Economic Co-operation and Development, slower-than-anticipated demand growth from China, and an increase in US oil production, as per the report.

The interest rate-sensitive banking sector is expected to be in focus too. Domestic lenders are already struggling with slow deposit growth and analysts have a weak outlook on banking stocks in the medium-term, but things might change if rate cuts spur credit off-take, especially on the corporate side, experts said. The Nifty Bank index ended 0.3% higher.

Shares of non-banking financial institutions and insurance companies are expected to continue gaining. Morgan Stanley reportedly said there is increased interest in non-bank lenders as investors look to position for rate cuts. It said that interest in small-cap lenders, especially affordable housing, is high, as reported by ETNow on X. The Nifty Financial Services index was the second-best performer among the sectoral indices. Among the index constituents, shares of insurance companies and non-banking financial institutions were the biggest gainers, outperforming those of banks.  End

US$1 = 83.92 rupees

Edited by Ashish Shirke

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