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Informist, Thursday, Dec. 5, 2024

By Alina Geogy

MUMBAI – Gains in information technology and banking stocks took the benchmark indices to one-month highs Thursday. IT stocks gained after comments by US Federal Reserve Chair Jerome Powell fuelled hopes of another rate cut at the upcoming policy meeting of the US Federal Open Market Committee, while banking stocks rose for the third consecutive session on strong expectations of liquidity-boosting measures by the Reserve Bank of India ahead of the central bank's monetary policy outcome Friday.

IT and banking stocks were the top contributors to the rise of the Nifty 50. Owing to gains in these stocks, the 50-stock index went up over 390 points, or 1.6%, to a one-month high of 24857.75 points. However, after some volatility in the last half hour of trade, the index closed at 24708.40 points, up 240.95 points, or 1%.

Thursday saw the expiry of the weekly derivative contracts of the 50-stock index. The Nifty 50 is now down 6% from its record high of 26277.35 points, which it hit in late September. Meanwhile, the BSE Sensex closed at 81765.86 points, up 809.53 points, or 1%. With this, both indices extended gains for the fifth consecutive session.

Shares of IT companies such as Infosys, Tata Consultancy Services, and Wipro were among the best performers in the Nifty 50 index. Investors cheered Powell's comments that the US economy is in "remarkably good shape" compared to when the Fed began cutting interest rates in September. This has raised the probability of a 25-basis-point cut later this month to 74%, from 66.5% a week ago, on the CME FedWatch tool. Several global equities gained after Powell's comments, with indices in the US hitting fresh record highs and closing sharply higher. The Fed had cut interest rates at its two recent meetings, beginning with a 50-bps cut in September and a further cut of 25 bps last month.

Back home, market watchers are increasingly of the view that the RBI may cut the cash reserve ratio by 50 bps from the current 4.5%. This expectation pushed several banking stocks up and took the Nifty Bank index up 0.6%. Shares of ICICI Bank and HDFC Bank were among the major contributors to the Nifty 50's rise. Shares of HDFC Bank rose for the fifth consecutive day to hit a new record high, but ended 0.3% higher.

"Amid tight liquidity conditions, the noise of easing liquidity via CRR cut is on the rise, which, if implemented by the RBI, could ease the squeeze and should be positive for HDFC Bank," Emkay Global Markets Research said in a report. A 50 bps cut in the cash reserve ratio could lead to 2-3 bps benefit on net interest margins, it said. Meanwhile, the RBI is largely expected to retain the repo rate at 6.50% for the 11th consecutive time, but there are also some analysts who expect a 25-bps cut.

The outlook for the banking sector is favourable, especially because of attractive valuations, Asutosh Mishra, lead banking, financial services, and insurance analyst and head of research, institutional equity, at Ashika Stock Broking, said. There are expectations of a reduction in the CRR for banks, and this will be an additional positive, he said. The central bank needs to ease liquidity in the system before rate cuts can happen, Mishra said. Market participants are also keenly watching whether RBI Governor Shaktikanta Das gets an extension to his term. Das as governor is seen as a positive for the market, Mishra said.

Among other stocks, shares of BSE hit a record high and closed nearly 14% higher to become the top gainer in the Nifty 200 index. The rise is attributable to rising retail participation in the stock markets and robust earnings growth expectations, Vikas Jain, head of research at Reliance Securities, said in a note. Shares of Swiggy closed over 4% higher, extending gains for the fourth straight session, after its Chief Financial Officer Rahul Bothra said the company is looking to increase the delivery fees it charges from customers on its quick commerce platform Instamart in a bid to improve its unit economics. The food delivery company's consolidated net loss also narrowed on year in the September quarter.

Shares of pharmaceutical firm Divi's Laboratories closed nearly 3% lower after Switzerland-based drugmaker Novartis lost an appeal in a US court to stop MSN Pharmaceuticals' proposed generic of its heart drug Entresto. This development is expected to hit the profitability and volumes of Divi's Laboratories, according to analysts. Shares of Juniper Hotels gained over 3% after global broking firm CLSA initiated coverage on the stock with a 'buy' rating and a target price of INR 430, indicating nearly 16% upside.

 Of the Nifty 50 stocks, 41 rose and 9 fell

* Of the Sensex stocks, 27 rose and 3 fell

* On the NSE, 1,483 stocks rose, 1,304 fell, and 77 were unchanged

* On the BSE, 2,130 stocks rose, 1,841 fell, and 112 were unchanged

* Nifty IT: up 2%; Nifty Infrastructure: up 0.8%; Nifty Realty: down 0.3%

BSE                                               NSE

Sensex: 81765.86, up 809.53 points or 1%          Nifty 50: 24708.40, up 240.95 points or 1%

End

Edited by Rajeev Pai

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