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Informist, Tuesday, Sep 17, 2024

By Anjana Therese Antony

MUMBAI – With the domestic equity market completely factoring in a 25-basis-point reduction in US interest rates this week, investors are likely to take cues from global markets in the absence of major events in India. Analysts see headline indices moving hardly 0.1-0.3% higher on Wednesday, while profit booking is also seen intra-day. "Especially when we do not have anything major happening in our market, investors look at global markets to decide on their trading actions ... and whatever trend is there, it is more likely to reflect here," a research analyst at a domestic bank-sponsored broking firm said. 

The US Federal Reserve is scheduled to announce its decision on interest rates on Wednesday after Indian market hours. There is increasing optimism that the Fed may go for a 50-bps cut, in which case, the Indian market may rise at a faster pace, analysts echoed. However, in the worst-case scenario of no rate cuts, three analysts see the market falling 2-3% intra-day. The CME FedWatch Tool now shows a 67% possibility of a 50-bps cut on Wednesday, compared to the 59% chance it showed on Monday and 43% on Friday. 

Today, benchmark indices ended at their record closing highs. The Nifty 50 and BSE Sensex ended 0.1% higher each at 25418.55 points and 83079.66 points, respectively. The support for the 50-stock index is seen at 25380-25370 points and resistance at 25450-25500 points for Tuesday, technical and derivatives analysts at two broking firms said. 

Meanwhile, stretched valuations may also limit the pace of upside in the near-to-short term, along with an above-normal monsoon, which could lead to crop damage and push food inflation higher. On the other hand, likely rate cuts by major central banks, robust domestic corporate earnings, benign inflation, and rural demand recovery could keep Indian stocks good bets in the medium-to-long term, analysts echoed.

When it comes to the steel sector, InCred Equities expects earnings underperformance of companies to continue. "Despite underperforming by 50%, the resilience of the stock price is remarkable. Even after three years of repeated disappointments, the stock has not budged at all and remains at the same level it was in July-August 2021," it said in its research report today. Today, the Nifty Metal index closed 0.4% lower, with most constituents in the red. Shares of Tata Steel and Steel Authority of India snapped a three-day winning run, while Jindal Stainless closed lower for the second consecutive session. 

The rise in crude oil prices may weigh on oil refining companies, such as Bharat Petroleum Corp, HIndustan Petroleum Corp, and Indian Oil Corp, which closed lower for the third straight session. The Brent Crude futures traded on the Intercontinental Exchange rose above $73 per barrel today from $68.68 per barrel on Sep 10. "Oil prices climbed as the market reacted to production disruptions in the US caused by Hurricane Francine, which shut down 12% of crude and 16% of natural gas output in the Gulf of Mexico," Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. 

When it comes to sectors which depend heavily on rural demand, analysts said there is room for growth in fast-moving consumer goods and two-wheeler manufacturing companies in the automobile sector. Green shoots of recovery in rural demand and increasing sales volume of two-wheeler manufacturing companies are expected to keep shares of such players as a good bet in the medium term. For FMCG, the likely price hikes by companies in the coming quarters, especially following the increase in import duty on the key raw material edible oil, may bode well for organised players in the long term. 

Shares of PN Gadgil Jewellers may rise more on Wednesday, considering the strong listing and positive response from anchor investors, a research analyst at a domestic broking firm said. "Due to its rich heritage of PNG brand equity and legacy of more than 150 years old, the market may give a higher valuation multiple compared to its listed peers," Prashanth Tapse, senior vice-president (Research), at Mehta Equities, said in a post-listing note. Today, the stock closed over 65% higher at 793.30 rupees on the National Stock Exchange after listing at 830 rupees.

Meanwhile, some experts were optimistic on the Securities and Exchange Board of India's recent initiative to provide a timeline for the completion of allotment of bonus shares after a listed company intimates the record date. "This means that investors can trade such shares in T+2 days, which increases liquidity and provides more trading possibilities," Trivesh D., chief operating officer at Tradejini, said in a note. "I believe that if SEBI takes a similar approach towards Dividend payouts, it would be beneficial," Trivesh added. The change will be effective for all bonus issues announced on or after Oct 1.  End

Edited by Manisha Baxla

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