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Informist, Tuesday, Sep 24, 2024

By Alina Geogy

MUMBAI – Though the overall approach of investors towards Indian equities remains positive, analysts believe the impact of the 50-basis-point reduction of interest rates in the US is fading. Market participants were divided on the likely direction of the market on Wednesday, especially as benchmark indices closed largely unchanged today after hitting fresh record highs. While some analysts expect the market to take a breather from the recent deeper US rate cut-led cheer, few others believe the market will inch higher but at a slower pace. 

Today, benchmark indices hit fresh record highs during the day, but gave up most gains in the second half. The Nifty 50 and BSE Sensex ended almost flat at 25940.40 points and 84914.04 points. For the Nifty 50, 25850-25800 points would be a key support zone, while 26050-26100 points could be a key profit booking area, Shrikant Chouhan, head of equity research at Kotak Securities, said in the note.

A higher-than-expected rate cut by the US Federal Reserve last week buoyed investor sentiment, which is being further supported by good domestic economic conditions, a healthy monsoon, and strong foreign inflows into the market, Amish Shah, research analyst at Taurus Corporate Advisory Services, said. Analysts said it is just a matter of time before the Reserve Bank of India also cuts key interest rates, but it may happen only after inflation comes under control. A rate cut by the RBI would be beneficial for the banking sector stocks, they said.

Trading will likely be stock-specific, with profit-booking in those shares that rose "too fast and too soon", Shah said. Even if there is any kind of correction in the market, it will neither be long nor meaningful, he said. Valuations of sectors such as defence are still high, and it is very difficult to find value-buying, he added. 

The short-term market texture still leans towards the positive side, but there could be range-bound activity in the near future owing to temporary overbought environments, Chouhan of Kotak Securities said. Today, 50% of the stocks traded on the National Stock Exchange ended lower, while 47% ended higher.

The domestic market may also benefit from healthy cues from international peers in the near term, which have been largely positive of late. The absence of major cues in India has kept investors' focus on trends in global markets to decide on investment actions. Market watchers will also keep an eye on developments in West Asia, especially after Israel's attack on Monday on militant group Hezbollah in Lebanon, which has elevated worries about a wider war in the region. The geopolitical tension in West Asia had earlier led to a surge in crude oil prices, particularly in April, which hit shares of Indian oil marketing companies. 

Further, sentiment towards the information technology sector has been positive since the US Fed's rate cut last week, the first reduction in about four years, analysts said. However, there are growing worries that the September quarter earnings may not better than the previous quarter for domestic IT firms, particularly because the demand environment has not shown any major signs of improvement.

Also, the supportive fiscal measures announced by China in a bid to jump-start its economy are being seen as a positive move for Indian metal companies, increasing the likelihood of more demand from China. However, analysts also said it was too soon to ascertain the benefits of China's latest policy to boost its economy and that the country's economic data needs to be closely monitored.

In the case of the consumer sector, there is limited upside from a valuation perspective, particularly after a steep run-up in prices of staples stocks in the last few months, Nirmal Bang Institutional Equities said in a report. "Our channel checks suggest a tepid start to the festive season, particularly for consumer durables, with premium products still driving sales", the brokerage firm said in its fortnightly update. "Media companies are, however, upbeat on higher festive ad-spends driven by the premium segment".

Among upcoming initial public offerings, KRN Heat Exchanger and Refrigeration's offer will open for subscription on Wednesday and close Friday. The company has set the price band for its initial public offering at 209-220 rupees per share. The company manufactures fin and tube-type heat exchangers for the heating, ventilation, air conditioning, and refrigeration industry.  End

Edited by Saji George Titus

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