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Informist, Wednesday, Aug 28, 2024

By Alina Geogy

MUMBAI – Domestic benchmark equity indices are expected to be volatile Thursday on account of the monthly expiry of the August derivatives series, but the overall trend remains bullish, analysts said. Continuing positive sentiment and strong fund inflows could help the indices hit fresh record highs, they said.

Over the next few days, the Nifty 50 could rise 400 points from the current level to 25400-25450 points if the US Fed surprises the market with a 50 basis points rate cut, according to Prashant Tapse, senior vice-president of research at Mehta Equities. The market has already discounted a 25-bps rate cut by the Fed in September, but there is some market buzz about a 50-bps rate cut too, he said. Nearly 35% of interest rate traders in the US expect a 50-bps rate cut by the Fed next month, more than three times the 11% who expected this cut a month ago, as per the CME FedWatch Tool. The remaining 65% expect a 25 bps cut.

Analysts, however, cautioned that there could be some profit-taking on Thursday, similar to what happened today and Tuesday. Today, the Nifty 50 index ended at a record high of 25052.35 points, up 0.1%. While the Nifty 50 was up for most of the session today, there was some profit-booking in the last hour of trade. 

For the Nifty 50, immediate resistance is pegged at 25100 points, while the support is set at 24900 points. The Nifty 50 index extended gains for the 10th consecutive session today, while the Sensex rose for the seventh straight session. The Sensex ended at 81785.56 points, up 0.1%, today. 

The market trend is expected to remain positive till the US Fed cuts key interest rates in September, Tapse said. US Fed Chair Jerome Powell on Friday said, "the time has come for policy to adjust", indicating that the Fed could loosen the monetary policy at its meeting next month, for the first time in more than four years.

Pharmaceutical stocks, which were among the major gainers today, are expected to continue rising. The sector is attracting investors as this defensive pack is a comparatively safer option amid concerns of profit-booking in the overbought market scenario, analysts said. Some pharmaceutical stocks are also at comfortable valuations. The Nifty Pharma index has been rising for all three sessions this week and ended 1.1% higher today.

Shares of non-banking financial institutions are expected to continue to gain on Thursday as investors are looking to position for potential rate cuts. Interest in small-cap lenders, especially affordable housing, is high, Morgan Stanley said in a report Tuesday, reported ETNow. The brokerage also said there was interest in insurance companies after the recent rally and stronger monthly premium data, according to reports.

Shares of real estate firms are likely to remain weak, Dharmesh Shah of ICICI Securities said. Analysts had raised concerns about the expensive valuations of the sector and the majority of large developers were dependent on new launches. However, shares of smaller real estate developers were at comparatively cheaper valuations and the companies also have a healthy sales outlook, analysts said. 

Apart from strong fund inflows, investor sentiment remains positive due to a strengthening belief that the US Federal Reserve will cut key interest rates in September, analysts said. US-based Nvidia Corp's earnings for the July quarter, expected later today, and inflation data from the US, due Friday, are eagerly awaited.

Artificial intelligence giant Nvidia's earnings are being looked upon as a make-or-break moment for global markets, partly given the extreme optimism around artificial intelligence stocks over the past year, Dow Jones reported, financial services provider IG as saying. After four straight quarters of earnings growth topping 400%, Nvidia's May-Jul profit increase is expected to moderate to around 141%, Dow Jones reported.

Geopolitical developments in West Asia, particularly the escalating conflict between Israel and the Iran-backed militant group Hezbollah, will also be watched. Worries of escalating tensions in the region had affected prices of crude oil earlier this week. Brent crude oil futures were at $78.24 per barrel, down 1.6%. Crude oil prices fell today because of demand concerns owing to sluggish economic growth in the US and China, overshadowing potential supply disruptions from West Asia, Kaynat Chainwala, assistant vice-president of commodity research at Kotak Securities, said in a note.  End

US$1 = 83.95 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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