Closing Bell: Nifty ends above 17,500, Sensex gains amid volatility; IT, power, metals drag

Markets ended marginally higher in a volatile session, taking a breather after the recent rebound. After the initial uptick, Nifty witnessed a gradual decline as participants preferred to book some profits off the table and it finally settled at 17,512.25 levels.

Most sectors traded in line with the move and ended flat to marginal in the green. The broader indices too witnessed a similar trend.

Indications are pointing towards some consolidation in Nifty and it would be healthy. Meanwhile, the performance of the global indices, especially the US, will remain on the radar. Since all sectors are contributing to the move, the focus should be more on stock selection, keeping in mind the prevailing earnings season.

Dalal Street witnessed slight nervousness after three consecutive sessions, however index managed to close in green. Markets factored in rate hike and moved forward nevertheless the market remained volatile before weekly expiry.

Nifty has been trading within the range of 50 and 61.8 percent of Fibonacci retrenchment; precisely closing above 17610 would be important for the next rally and if 17400 is breached 17260 would be acting as strong support for coming days.

Open Interest (OI) Data indicates, on the call side the highest OI witnessed at 17800 strike prices while on the put side, the highest OI was at 17400 followed by 17300 strike price. On the other hand, Bank Nifty has support at 39800 levels while resistance is placed at 40800.

Significant degree of call writing has been seen in the Bank Nifty Index at 41000 level as well. Rupee slides to yet another historic low of 83.04 mark against the dollar. The India VIX, indicates no widespread concern as long as it remains below 20 levels.

Over the years, the Indian market has outperformed the global markets, supporting the idea that if foreign investors want to achieve world-beating returns, they cannot afford to ignore India.

The Bank Nifty index faces some selling pressure at the higher levels and failed to close above the level of 40,500. The options data indicates the resistance at 40,500 where the highest open interests are built up on the call side.

The index once closes above 40,500 will witness a further up move towards 41,000-41,500 levels. The index remains in a buy-on-dip mode with strong support at the 40,000-39,800 zone.

As cautious mood prevailed in global markets, indices back home ended with steady gains. While broader market was mixed, investors are mostly engaged in selective buying.

Technically, the Nifty has formed a small bearish candle on daily charts. However, the short term texture of the market is still positive.

We are of the view that 17,400 would be the sacrosanct support zone for the index. If the index trades above the same, it could move up to 17,600-17,700 in the near future. On the flip side, below 17,400 uptrend would be vulnerable.

European markets interrupted their winning run after a 40-year high CPI in the UK. However, the strong US market due to healthy corporate result announcements is helping the domestic market to sustain the positive trend.

Declining oil prices because of increased US supply and global economic slowdown are improving the sentiment for India

Domestic institutions have been strong buyers in the market over the last week, as 2QFY23 results have come in line or stronger than expected, thus far. 5 out of 6 Nifty companies and 12 out of 20 BSE200 companies which have reported thus far have surprised positively.

With a quarter of relatively softer commodity prices, we expect the earnings season to be relatively strong going ahead as well. However, developments in global bond markets have been more challenging and the macro environment continues to remain clouded by second order impact of higher interest rates as well as continuing strong inflation prints.

While seasonality favours a strong month for global equity markets, we continue to believe that upsides for Indian markets may remain capped due to adverse valuation differential relative to EM peers and hence, muted foreign flows. We prefer Banking, Autos and Consumer discretionary sectors over cyclical.

Monthly support for Nifty50 remains lower at 16580. Short term momentum remains positive – sentiment will further improve if broader participation is seen from the midcap space. Volatility expected to remain high as global markets continue to remain in a corrective phase.

Some option pointers:
• Monthly setup continues to remain positive
• Momentum remains positive while Sentiment lags – broader participation will help
• FII and PRO have witnessed positive bias positioning in index options segment
• For Nifty, maximum OI buildup seen at 17500 Put and 17600 Call Option. For Bank-Nifty, maximum OI buildup is seen at 40500 put and 40000 call options
• For the expiry day, Expect Nifty to trade with support of 17300-17400 levels

Benchmark indices ended higher for the fourth straight session on October 19 with Nifty finishing above 17,500.

At Close, the Sensex was up 146.59 points or 0.25% at 59,107.19, and the Nifty wa up 25.30 points or 0.14% at 17512.30. About 1592 shares have advanced, 1724 shares declined, and 149 shares are unchanged.

HDFC, Nestle India, ITC, Reliance Industries and Axis Bank were among the top Nifty gainers. NTPC, JSW Steel, SBI, Bajaj Finserv and Coal India were the top losers.

Among sectors, metals and power down 1 percent each, while FMCG and Realty indices ended in the green.

The BSE midcap and smallcap indices ended on flat note.

Indian rupee ended at fresh record closing low at 83.02 per dollar against previous close of 82.36.

Bharat Bond Exchange Traded Funds, a central government initiative, have crossed the Rs 50,000 crore asset under management mark in just two-and-a-half years, Edelweiss Mutual Fund said on Wednesday.

The fund house manages Bharat Bond Exchange Traded Funds (ETFs).

The overall passive debt category has crossed Rs 1.15 lakh crore mark at the industry level this growth was kickstarted by the launch of the first tranche of the Bharat Bond ETF in December 2019, according to a statement.

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Although we expect Nestle to gain from lower costs of Palm oil while firm prices of food grains, coffee and milk might prevent a sharp uptick in margins in near term.

We factor in EBIDTA margin decline of 170bps in CY22 and a gradual recovery of 90bps over coming couple of years.

We estimate 11.2% PAT CAGR over CY21-24. We expect slow returns given near term margin pressure and rich valuations of 66.1x CY23 EPS.

Maintain Accumulate with a DCF based Target Price of Rs 20,111 (Rs 20,178 earlier

We model in a NII/PPOP/PAT CAGR of 18%/19%/18% over FY22-24 for an RoA of 1.9%/1.8% and RoE of 17.6%/16.7% over FY23/24, respectively.

Can Fin Home is a franchise with moats on the liability side and strong asset quality. Its ability to maintain stable margins is a key monitorable as CANF continues on its healthy loan growth trajectory.

The next leg of the re-rating in valuation multiple will be contingent on the appointment of the new management team and its ability to inspire investor confidence in loan growth and asset quality. We reiterate our Buy rating with a Target Price of Rs 610 (premised on 1.9x FY24E BVPS.