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Informist, Monday, Sep 23, 2024

By Anjana Therese Antony

MUMBAI – Strong inflows from foreign investors are likely to push the Indian equity market to a new record high on Tuesday, while periodic corrections due to expensive valuation could limit the gains, analysts said. "Large-caps will continue to gain, and global market trends will drive investment decisions (in India), which is normally the case in the absence of major domestic trigger," a research analyst at a domestic broking firm said. 

The benchmark Nifty 50 is expected to cross the fresh record high of 25956 points and may even reach its new psychologically-important level of 26000 points. The support for the 50-stock index is seen at 25850-25800 points and resistance at 26000-26100 for the near term. Today, the Nifty 50 ended 0.6% higher at 25939.05 points and the BSE Sensex closed 0.5% higher at 84928.61 points, which are the record closing highs of both indices.

Today's extended optimism follows a deeper interest rate cut last week by the US Federal Reserve, which started the rate trimming cycle with a 50-basis-point reduction. This was higher than the 25-bps cut global equity markets had factored in. Though there was speculation about the strength of the US economy following the deeper rate cut, the subsequent trading sessions saw investors getting lured more into equities on hopes that the world's largest economy may not be falling into a recession. 

The surge in the fear gauge, India VIX, today also hints at the near-term nervousness in the market about a correction. The volatility index closed 7.8% higher at 13.7850. However, analysts do not see a major correction, especially as major shockers are not expected.

The movement in crude oil prices will be closely watched, especially as its prices start to rise again. Oil marketing companies may also see selling pressure if crude oil prices continue to rise more. The rise in crude oil prices had hit the refining margins of oil refining companies significantly in the previous quarter. 

With crude prices seeing a decline in recent months, crude derivatives are also likely to follow suit, which bodes well for margin expansion for paint companies such as Asian Paints and Berger Paints, Nirmal Bang Institutional Equities said in its research report. In Jul-Sep, the price of Brent crude declined 6.6% on year and 4.6% on quarter, the broking firm said. The Brent crude oil futures traded on the Intercontinental Exchange rose above $75 per barrel from a low of about $68 per barrel on Sep 10.  End

US$1 = 83.55 rupees

Edited by Aditya Sakorkar

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