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Informist, Tuesday, Nov. 5, 2024

By Anjana Therese Antony

MUMBAI – Though the Indian equity market saw a session of gains Tuesday, analysts do not expect the optimism to sustain Wednesday as slowdown in corporate earnings growth, persistent selling by foreign investors, expensive valuations, and volatility ahead of the US presidential election outcome may keep gains under check. The recent correction was much awaited and the current cues do not support bulls, a research analyst at a domestic broking firm said. 

The Nifty 50 and Sensex closed 0.9% higher each at 24213.30 points and 79476.63 points Tuesday. The near-term support for the Nifty 50 is pegged at 23800-23950 points and resistance at 24300-24400 points. Benchmark indices, which were choppy during most of the day, shot up in the last two hours of trade, primarily led by the gains in index heavyweight HDFC Bank which surged after reports said MSCI will increase the bank's weightage in the upcoming quarterly rejig. Hence, analysts believe investors' focus will turn back to the near-term fundamentals which are not in favour of the bullish investors. 

When it comes to various domestic sectors, banks and financial services stocks may extend gains on Wednesday, but may not sustain their momentum. These stocks surged and were the bellwether of gains on Tuesday which led to a nearly 0.6% rise in the Nifty 50 index. HDFC Bank, which remained muted in the first half of the session, surged in the second half and closed 2.6% higher at INR 1,757.85 on the National Stock Exchange. Nuvama Alternative & Quantitative Research expects about $1.88 billion inflows in HDFC Bank if its weightage is increased. MSCI's quarterly rejig is scheduled for Wednesday. 

Steel stocks may rise more Wednesday on expectation of a hike in the anti-dumping duty on steel imports. Shares of steel companies such as Jindal Steel & Power, Hindalco Industries, Tata Steel, Steel Authority of India, and JSW Steel closed nearly 3-5% higher. ETNow exclusively reported that the government may increase the anti-dumping duty on steel to 12% from the current 7.50%. It also said the government will consider tightening quality checks on imported steel and the industry has sought for a 25% safeguard duty, similar to that in the US, the European Union, and Canada. 

Shares of information technology companies may see volatility ahead of the outcome of the US elections. Indian IT companies have significant exposure to the US, with about 60% of their revenue earned from clients in the world's largest economy. The Nifty IT was the lowest sectoral gainer today and closed 2.80 points higher at 40424.60 points, with half of the constituents in the green.

All eyes will be on the US presidential election outcome. "The US presidential elections have always been the apple of the financial world's eye, even now, it has caught the spotlight while creating all the buzz in financial markets, with potential outcomes shaping divergent paths for both bonds and equities," said Shrisha Acharya, vice president at Anand Rathi Global Finance, in a note. Democrat candidate Kamala Harris' rise has been met with a stock market rally glued on expectations of economic stability and controlled inflation, with more predictable fiscal policy likely to help in a soft landing. The Trump card, coupled with potential Republican control, could shoot higher yields due to anticipated increases in deficit spending, inflation risks, and potential tax cuts, Acharya said.

According to a poll by NBC News Monday, Harris and the Republican Party's Donald Trump were in a neck-and-neck contest. Both Harris and Trump were getting 49% support each from registered voters, while the remaining 2% of voters said they are unsure about the choice, NBC News said in its report. 

Investors await HSBC India Services and Composite purchasing managers' index for October, by S&P Global, due 1030 IST Wednesday. Thursday, they will closely watch the interest rate decision of the US Federal Open Market Committee's as well as the Bank of England.  End

Edited by Akul Nishant Akhoury

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