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Informist, Tuesday, Oct. 29, 2024

By Alina Geogy

MUMBAI – The benchmark indices are expected to rise for the third straight session Wednesday as banking stocks are likely to extend gains owing to cheaper valuations and expectations of more strong earnings from the sector, analysts said. The recent fall in global crude oil prices and gains in global markets are also likely to help the rise in the indices. However, these gains may be capped owing to high valuations in other sectors and relentless selling by foreign institutional investors.

Analysts said the fall in the indices for the past four weeks has created conditions for a slight pull-back. As of Friday, the benchmark indices were down nearly 8% from the all-time high hit on Sept. 27. However, the indices would need to sustain the latest gains for at least a few more days before they can head towards any meaningful recovery, analysts said.

The Nifty 50 may rise further if it stays above 24400 points, which was seen as a key hurdle. On Tuesday, the Nifty 50 and the BSE Sensex each closed up 0.5% at 24466.85 points and 80369.03 points, respectively. The resistance for the Nifty 50 is seen at 24600 points followed by 24660 points, while support is now seen at 24300 points.

The India VIX, a key indicator of volatility in the market, rose 1.6% and closed at 14.5150. "With VIX levels remaining below 15, the market's inclination toward bullish momentum may strengthen, as lower volatility tends to attract buyer interest," said Om Mehra, technical analyst at brokerage SAMCO Securities.

Banking stocks have grabbed the limelight for both sessions this week, helping the benchmarks snap a five-day losing streak Monday. These gains came after some major banks reported better-than-expected earnings for the September quarter, a contrast with companies in other sectors, which have mostly disappointed investors with subdued earnings growth. ICICI Bank, HDFC Bank, Canara Bank, and Federal Bank are some of the banks that have reported healthy earnings growth. These positive factors are expected to help the sector rise further over the next few days, analysts said.

The deposit growth of scheduled commercial banks outpaced credit growth in the September quarter, CARE Ratings said in a report. This trend was driven by attractive deposit rates and banks increasing liquidity for lending, the ratings and analytics firm said. Despite the slower growth in net interest income and a drop in net interest margins, the banking sector remains resilient, adapting to changing market conditions, it said.

Shares of Larsen & Toubro will be in focus Wednesday with the company set to report its quarterly earnings. It is expected to report a consolidated net profit of INR 32.62 billion for the September quarter, up 1.2% on year and 17% sequentially. This slowdown in earnings growth is expected to be due to a fall in order inflows, sluggish execution of domestic contracts, and flat-to-declining operating margin.

Investors now await the monthly automobile sales data due later this week. The data will throw more light on demand trends in the sector. Analysts expect commercial vehicle manufacturers to report a decline in sales for October, while tractor and two-wheeler makers may post strong growth. Shares of Hero MotoCorp, Maruti Suzuki India, and Tata Motors ended 2-4% lower Tuesday and were among the worst hit automobile stocks.  End

Edited by Rajeev Pai

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