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Informist, Wednesday, Nov. 6, 2024

By Alina Geogy

MUMBAI – Indian equities ended with sharp gains Wednesday as investors cheered Donald Trump's march to victory in the US presidential election, analysts said. The rise was led by sharp gains in information technology and some heavyweight stocks. A whopping three-fourths of all stocks traded on the bourses ended the session with gains.

Uncertainty about who would win the election had gripped the market over the last few days. These worries have been put to rest with the Associated Press calling the election for Trump, and his Republican Party establishing a majority in the US Senate, analysts said. The India VIX, the fear gauge of the equity market, fell sharply, signifying that recent worries about the poll outcome in the world's largest economy were fading. It fell for the second day in a row and ended at 14.87, down nearly 8%.

"Trump is pro-market" and his win is expected to kick off a pull-back in the market, Rajesh Palviya, head of technical and derivatives research at Axis Securities, said. This pull-back may take the Nifty 50 up 1-2% more to 24600-24700 points, he said. The market was already oversold and, with uncertainty about the election results swept away, has now received the trigger for a sharp bounce-back, he said. Investors are likely to have covered their short positions after having a bearish approach in the last few days, some analysts said.

After a slightly positive opening, the indices rose steadily as counting for the US elections progressed. The gains were cemented as early results indicated a victory for Trump. The Nifty 50 closed at 24484.05 points, up 270.75 points or 1.1%, with 40 of its stocks in the green. At its intraday high, the 50-stock index rose as much as 333.55 points from the lowest point of the day all the way to 24537.60 points, breaching the key level of 24500 points. The BSE Sensex closed at 80378.13 points, up 901.50 points or 1.1%.
 

The market had corrected recently, and the gains are a result of the US election results being in favour of the market, Vikas Inder Jain, head of research at Reliance Securities, said. The Nifty 50 is now seen headed towards 24800 points over the next few days, Jain said. Trump's approach and the policies proposed by him are seen to be largely positive, and he is also expected to take swift action to ease geopolitical tensions in West Asia, Jain said.

"Prima facie, Trump is very supportive for Indian policies", Palviya of Axis Securities said. With Trump in power, there may be more business deals between India and the US and a boost to mobilisation of funds, particularly as Prime Minister Narendra Modi's relations with Trump are good, he said. Further, Trump is vocal about geopolitical issues, and is expected to intervene and potentially resolve the conflict between Israel and Iran, he said. Bottlenecks, if any, in political scenarios can be resolved, he said.

Meanwhile, the picture is not entirely rosy. There is still some uncertainty about some of Trump's proposals, such as curbs on the H-1B visa, which could affect Indian IT firms and their operations and employees in the US. But analysts said one would need to wait for further clarity on several of Trump's proposals, such as stricter immigration rules and higher tariffs on imports. There is a chance that Trump may support visa policies that are favourable for India after a dialogue with the Indian government, an analyst said.

IT stocks were the best performers, as a Trump win is seen as a positive for the sector. His win could also boost the business environment in the US, leading to an increase in discretionary spending and more outsourcing, analysts said. Shares of Tata Consultancy Services, Tech Mahindra, HCL Technologies, and Infosys rose around 4% each and were among the top gainers in both benchmark indices. Gains in these stocks also took the Nifty IT up 4%, making it the best performing sectoral index.

Shares of index heavyweights Reliance Industries and Larsen & Toubro extended gains for the second consecutive session, rising 1.5% and 2%, respectively; this, too, pushed the benchmark indices up. All sectoral indices were in the green, with Nifty IT, Nifty Realty, and Nifty Oil & Gas gaining the most.

The broader market wasn't left out of the cheer. All the Nifty mid- and small-cap indices closed around 2% higher, outperforming the benchmarks. Over 180 stocks traded on the NSE hit the upper circuit during the session. 

Investors now look forward to the outcome of the US Federal Reserve's monetary policy meeting later this week, where policymakers are widely expected to cut key interest rates by 25 basis points. There is currently a 96% probability that the Fed would cut rates by 25 bps, while there is a 4% chance that rates would be kept unchanged, according to the CME FedWatch tool. The results of the presidential election and the likely changes to policies are expected to have a significant effect on future actions of the Fed, analysts said.

While polls in the US grabbed the limelight, corporate earnings and subsequent comments by analysts continued to help market participants make investment decisions. Shares of Titan Co. closed down almost 2% after having fallen as much as 3.6% earlier in the day to a five-month low. Analysts raised concerns about the company facing margin pressure in the near term, following a cut in operating profit margin guidance for the jewellery business for 2024-25 (Apr-Mar), largely due to a one-time impact from the cut in customs duty on gold in July. The company had also reported lower-than-expected net profit and revenue for the September quarter.

Shares of Dr. Reddy's Laboratories gained over 2% after the company reported the highest top line growth in five quarters for Jul-Sept. The gains came despite a 15% on-year fall in consolidated net profit, a decline larger than analysts had estimated. Analysts were positive about the drugmaker's plans to launch new biosimilars in the US and Europe and ramp up its spending towards research and development. Shares of GAIL (India) rose over 6% after the company reported slightly better-than-expected net profit for the September quarter.

Among other stocks, shares of Hindustan Zinc fell over 8% after the government said it would sell up to 2.5% stake in the company through an offer for sale. The government set the floor price for the offer at a discount of 9.8% from the previous close.

* Of the Nifty 50 stocks, 40 rose and 10 fell

* Of the Sensex stocks, 25 rose and 5 fell

* On the NSE, 2,213 stocks rose, 620 fell, and 71 were unchanged

* On the BSE, 2,999 stocks rose, 969 fell, and 95 were unchanged

* Nifty IT: up 4%; Nifty Realty: up 2.6%; Nifty Private Bank: up 0.03%

BSE                                               NSE

Sensex: 80378.13, up 901.50 points or 1.1%        Nifty 50: 24484.05, up 270.75 points or 1.1%

End

Edited by Rajeev Pai

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