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Informist, Thursday, Sep 12, 2024

By Noel John

MUMBAI – The day of weekly expiry of option contracts saw short covering in heavyweight stocks in the final hour of trade, which pushed benchmark indices to record intraday and closing highs. The positive sentiment from global markets on largely in-line US August inflation data has also provided some cushion to the indices. The Nifty 50 crossed above the crucial 25400 points and the Sensex surpassed 83000 points for the first time.

The markets gained further strength on news of China cutting rates by 50 bps on $5 trln mortgages as soon as this month to boost consumption came out ahead of a European Central Bank's policy meeting later in the day, Narendra Solanki, head of fundamental research and investment services at Anand Rathi Shares and Stock Brokers, said in a note.

Following the in-line US CPI data, the market seems to have factored in a 25-basis-point cut at the Federal Open Market Committee's meeting next week, Ruchit Jain, lead research analyst at 5paisa said. However, the Nifty 50 could rise towards 25700 points if the Fed decides to cut interest rates by 50 bps. 

Nuvama Institutional Equities believes the response of domestic equity markets to the Fed's rate cut next week will be contextual. "Today, many US labour market indicators are at levels indicative of recession, domestic demand is weak and valuations elevated. This warrants caution," Nuvama said in a report. 

Today, indices remained steady after opening higher, until the final hour of trading, where investors covered their short positions. The Nifty 50 has seen short covering across sectors and stocks, Saral Seth, vice president of institutional equities at IndSec Securities said. 

Both the Nifty 50 and the Sensex ended nearly 2% higher each at their record closing highs of 25388.90 points and 82962.71 points, respectively. The Nifty 50 hit its all-time intraday high of 25433.35 points and the Sensex hit its lifetime high of 83116.19 points. The Nifty 50 is now expected to find support at 25050 points, while the resistance is seen at 25350 points.

The sharp rise seen in the indices today was bound to happen as they were in a time correction in the past couple of sessions, Pankaj Karde, president and head of institutional equities at Asit C Mehta Investment Intermediates, said. However, the gains will slow down again, according to Karde, as global markets have historically given negative returns in September. "Investors are aware of this and hence, if not negative returns, flattish returns are on cards," Karde added. 

Shares of financial services, metals, and information technology companies were the top gainers today. Index-heavyweights Reliance Industries, Bharti Airtel, and HDFC Bank primarily helped the Nifty 50 notch new record highs. Further, all the Nifty 50 and the Sensex constituents ended the session in the green today, a rare trend seen in both indices.

Also, all Nifty Midcap indices notched record highs and closed over 1% higher. With retail money continuing to flow in, despite concerns of stretched valuations in local markets, investors remain upbeat about India's resilient economy in a slowing global economy, Prashanth Tapse, senior vice president of research at Mehta Equities, said in a post-market note. 

All sectoral indices ended in the green. Short covering was seen across sectors, especially non-banking financial services, metals, and power companies, according to analysts. Shares of non-banking financial services companies have rallied 3-11% in the past fortnight on account of increased market anticipation of a policy rate cut, Nomura said in a report today. While a rate cut will be positive for these companies, the rising credit cost in Jul-Sep would be the main triggers for further re-rating or de-rating of the sector, Nomura said. 

Shares of metal companies were among the major gainers today, with Hindalco Industries being the top gainer on the Nifty 50, tracking positive cues from the US markets. Shares of Tata Steel gained sharply in early trade today after the company on Wednesday signed a 500-mln-pound-sterling grant funding agreement with the UK government for its 1.25-bln-pound-sterling worth green steel project at Port Talbot. The current development is nothing new as it was expected for the past eight to nine months, and it has already been priced in at the stock's current levels, a research analyst who covers the metal sector with a domestic brokerage said.

The funding from the UK government is a subsidy given by the government to promote the shift to the green project as the company has already told the UK government that it might leave the country due to a lack of support, the analyst said. The grant is expected to accelerate the completion of the plant by at least six months early, but a contribution to the topline can only be expected around 2027-28 (Apr-Mar) or 2028-29, the analyst said.  

Shares of Bharti Airtel rose sharply and ended 4.4% higher after multiple announcements from the company. The company today said that it completed deploying additional spectrum across Chandigarh and Punjab. The additional spectrum, which the company acquired in July, will improve data speed and provide better indoor coverage. It has also expanded its home WiFi service across 22 districts in Jammu-Kashmir, Leh-Ladakh. This initiative will reach an additional 1.1 mln households across both Union territories, the company said.

Shares of Kaynes Technology India ended 10.8% higher at 5,165.85 rupees after Nomura initiated coverage on the stock with a 'buy' rating and target price of 5,969 rupees. The brokerage said domestic electronics manufacturing services players will capitalise on the strong potential of the electronics segment and will address global opportunities. Kaynes Technology could also benefit from the rising demand for electronics in the business-to-business space, Nomura said, as per media reports. 

On the downside, shares of Granules India ended 16.5% lower on concerns about data integrity issues at its manufacturing unit in Hyderabad, which may require another inspection by the US Foods and Drugs Administration. On Monday, the company said it got six observations for its Gagillapur facility following the US FDA inspection. As per the US FDA Form 483, the company tore and destroyed quality control data and good manufacturing practices documents, leading to data integrity issues, according to a post by Aditya Khemka, equity fund manager at Incred Asset Management, on social media platform X. 

"Additionally, if Granules feels that its operations are significantly impacted due to a warning letter, the company can also request a re-inspection once they believe they have resolved the issues. This would help in clearing any regulatory hurdles and resuming normal operations," a research analyst with a domestic brokerage said. 

* Of the Nifty 50 stocks, 50 rose and 0 fell

* Of the Sensex stocks, 30 rose and 0 fell

* On the NSE, 1,727 stocks rose, 1,003 fell, and 89 were unchanged

* On the BSE, 2,337 stocks rose, 1,609 fell, and 123 were unchanged

* Nifty Metal: up 2.9%; Nifty Infrastructure: up 2.4%; Nifty Auto: up 2.1%

BSE                                               NSE
Sensex: 82962.71, up 1439.55 points, or 1.8%      Nifty 50: 25388.90, up 470.45 points, or 1.9%

End

Edited by Vidhi Verma

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