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Informist, Tuesday, Sep 17, 2024

By Anshul Choudhary

MUMBAI – Benchmark indices rose for the second straight session and closed at record highs today in the run-up to the widely tracked US Federal Reserve meeting outcome on Wednesday, when the central bank is expected to announce a 25-basis-point cut in the key interest rate. Gains were small as investors would already have taken positions in the past few sessions, analysts said.

The possibility of lower interest rates has dominated conversation in equity markets globally this year. These expectations have played a major role in maintaining investors' belief in Indian equity markets even after valuations turned expensive in several sectors. Even today, sentiment remained positive around the policy meeting in the US and benchmark indices ended higher. The Nifty 50 ended at 25418.55 points--its highest closing level yet. This pushed the index's returns so far this year to nearly 17%.

"People are usually ready with their positions well ahead of such events...I will be looking at the dot plot and think market would be happy if there are signs of more rate cuts," Asutosh Mishra, head of research at Ashika Stock Broking, said. 

Indices started the session on a slightly negative note as global cues were mixed, which failed to provide major direction. However, buying in shares of information technology companies, which are seen benefitting majorly from a rate cut in the US, and some two-wheeler and energy companies helped benchmark indices end higher.

Shares of Hero MotoCorp and Bajaj Auto were the top gainers among Nifty 50 constituents and rose 3% and 2%, respectively. Both stocks closed at their highest levels yet with Hero MotoCorp ending at 5,961.20 rupees and Bajaj Auto ending at 11,950.30 rupees. These rose on a healthy outlook for two-wheeler sales and a possibility of even better demand once rate cuts in India materialise.

Shares of Mahindra & Mahindra rose as the company is seen better-placed to benefit from lower interest rates on its strong pipeline of products compared to its peers. Shares of M&M rose 1%, while those of Tata Motors declined 1.4%.

Sentiment around fast-moving consumer goods companies improved today after Monday's negative reaction to the hike in import duties on palm oil. Analysts pointed out that higher import duty may lead to an increase in cost, but it may also act as a much-needed trigger for companies to raise prices. Further, higher import duties on palm oil will hurt unorganised players, which will also help listed companies gain market share, analysts said.

Brokerage house Nomura Financial Advisory and Securities said that FMCG companies can now either buy palm fatty acid distillate in India at a higher price or import palm fatty acid distillate, which will be cheaper as the duty on such imports has not been changed.

It noted that Hindustan Unilever recently changed soap formation which will likely reduce its palm oil consumption by 20-25%, giving it a competitive advantage. Further, Godrej Consumer Products is unlikely to be affected by the tax increase as it largely imports palm fatty acid distillate. Among stocks, Britannia Industries rose 0.8%, while HUL and Godrej Consumer rose 0.2% each.

Among other large-cap stocks, Bharti Airtel rose 1.6%, Larsen & Toubro and Kotak Mahindra Bank rose around 1% each. Shares of Eicher Motors, Adani Ports And Special Economic Zone, JSW Steel and Tata Steel were down around 1% each. Shares of steel companies were weak as cheap imports from China continued to hurt product prices, affecting Indian companies' profitability, analysts said.

InCred Securities, in a note today, spoke sharply against the consensus view around steel companies' earnings against the backdrop of weak prices. "As we have written earlier, most of the consensus earnings of steel companies is bereft of arithmetic sense...trust these estimates at your own peril," the brokerage noted, while mentioning that underperformance of steel companies is likely to continue.

Broader market indices underperformed benchmark indices with the Nifty Midcap 150 down 0.1% and Nifty Smallcap 250 down 0.2%. Within mid-caps, some pharmaceutical and energy companies witnessed profit booking. Shares of Biocon, Suzlon Energy, and JSW Energy ended 3-4% lower. At the same time, some real estate companies rose, with the Nifty Realty index closing 0.6% higher ahead of the policy meeting outcome in the US.

Shares of Indraprastha Gas ended over 3% higher after brokerage firm UBS upgraded the rating of the stock to "buy" from "sell" and raised the target price to 700 rupees from 400 rupees earlier. UBS expects the company's volume growth to report a compounded annual growth rate of 8.2% between 2023-24 and 2026-27, which will be much better than the volume growth of 4% during the previous financial year.

Shares of PN Gadgil Jewellers ended at 793.30 rupees on listing day, which is over 65% higher than the issue price of 480 rupees. Shares of Bajaj Housing Finance, which got listed on Monday, ended at the 10% upper circuit of 181.50 rupees after gaining 136% on Monday.

Today, Bajaj Housing shares rose after brokerage PhillipCapital initiated coverage on the stock with a "buy" rating and a target price of 210 rupees. Bajaj Housing is increasingly focusing on lease rental discounting, a high-yield segment, the brokerage said. "In three years, BHFL is likely to have a balance sheet of Rs 2 lakh crore (2 trln rupees)," PhillipCapital said, as per media reports. 

Shares of Blue Dart rose 12% amid a surge in share volume. 1.4 mln shares of the company changed hands, far higher than its three-month daily average volume of 18,874 shares. Apart from this, shares of Centuty Plyboards and Nuvoco Vistas Corp rose 10% and 4%, respectively on high share volumes. 

* Of the Nifty 50 stocks, 21 rose and 29 fell

* Of the Sensex stocks, 15 rose and 15 fell

* On the NSE, 1,121 stocks rose, 1,665 fell, and 78 were unchanged

* On the BSE, 1,714 stocks rose, 2,239 fell, and 105 were unchanged

* Nifty Realty: up 0.6%; Nifty Consumer Durables: up 0.5%; Nifty Media: down 1.2%

BSE                                               NSE
Sensex: 83079.66, up 90.88 points, or 0.1%        Nifty 50: 25418.55, up 34.80 points, or 0.1%

End

Edited by Aditya Sakorkar

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