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Informist, Tuesday, Oct. 8, 2024

By Alina Geogy

MUMBAI – Benchmark equity indices may extend gains on Wednesday amid rising buying interest from domestic institutional investors and largely positive global cues, analysts said. Investors await the outcome of the Reserve Bank of India's monetary policy meeting, the first since the US Federal Reserve's 50-basis-point rate cut last month.

Analysts cautioned that potential gains in the indices on Wednesday would be capped as investors remain cautious about persistent sales by foreign investors, expectations of subdued corporate earnings for Jul-Sept, the ongoing conflict in West Asia, and higher prices of crude oil.

The RBI's commentary is critical, especially in the light of inflationary challenges and rising crude oil prices, analysts said. The market has "discounted" that the RBI would keep interest rates steady, they said. The RBI's Monetary Policy Committee is widely expected to keep the repo rate unchanged at 6.50%, but some are of the view that it could change its stance to 'neutral' from 'withdrawal of accommodation'.

Buying by domestic institutional investors is picking up steadily, as evident from data for the last few sessions, analysts said. This segment of investors cannot sit on cash for too long and needs to deploy it in the market soon, they said. Occasional corrections in the market, as seen in the last few sessions, could provide an opportunity for fresh investments, albeit with caution, as investors navigate expensive stock valuations, they said.

On Tuesday, domestic institutional investors net bought shares worth INR 70.01 bln on exchanges, as per provisional data. Meanwhile, selling by their foreign peers has declined over the past few days, with these investors net selling shares worth INR 57.30 bln on Tuesday.

For the Nifty 50, 24750 points is a critical level, as the index could rise more if it manages to sustain above this, according to Ajit Mishra, senior vice-president of technical research at Religare Broking. The 50-stock index may rise to 25300-25400 points as long as it remains above 24750 points, he said. On Tuesday, the Nifty 50 closed 0.9% higher at 25013.15 points and the BSE Sensex closed 0.7% higher at 81634.81 points.

Investors are waiting for Nifty 50 major Tata Consultancy Services to kick off the corporate earnings season on Thursday. The information technology firm is expected to report low single-digit sequential growth in key earnings metrics. Analysts said information technology stocks are seen positive, especially after recent data from the US hinted at a strong economy.

While most metal stocks are seen extending losses after lack of fresh stimulus measures by Chinese policymakers on Tuesday, select stocks might see a bounce-back, analysts said. There could be a correction of up to 5% for metal stocks in the next one and half months if consumption data from China for the last week misses market expectations, a research analyst covering the metal sector at a domestic brokerage firm said.

Metal stocks may be hit more owing to expectations that these companies will largely report subdued earnings for the September quarter. Besides, steel manufacturers are likely to post contraction in margins compared to the previous quarter, said the analyst quoted earlier.

Among specific stocks, shares of Torrent Power may gain after the company said it received a letter of award from Maharashtra State Electricity Distribution Co. for the supply of 2,000 megawatt of energy storage capacity from the InSTS Connected Pumped Hydro Storage Plant. The plant will generate annual revenues of INR 16.8 billion for the company, Torrent Power said. Shares of IRB Infrastructure Developers may also gain after the company said gross toll collection in September rose to INR 5.02 bln from INR 4.21 bln a year ago.

Among other news, Hyundai Motor India's initial public offering of around INR 251.9 billion will open for subscription next week and is likely to be priced in the range of INR 1,865-1,960 per share, as per a Reuters report. At the upper end of the price band, the subsidiary of South Korean automaker Hyundai Motor Co. will roughly be valued at $19 billion, as per the report.  End

Edited by Avishek Dutta

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