Closing Bell: Nifty ends around 17,400, Sensex up 214 pts; IT stocks gain

The Bank Nifty index ahead of the RBI policy witnessed sideways action and ended on a flat note. The index needs to close above 38,200 for a continuation of the uptrend towards the level of the 38,500-38,700 zone.

The index downside support stands at 37500 and if breached will witness further selling pressure towards the 37,000 zone. The index will give a clear direction once a policy is announced.

Bulls and bears slugged it out in a volatile charged session, but eventually the former maintained their winning streak on Dalal Street on buying in IT & select finance stocks. Even as FII buying into local equities has resumed after a gap of 3 months, traders are taking a stock-specific approach ahead of the RBI's rate decision on Friday.

Technically, on intraday charts, the Nifty has formed a double bottom formation and a bullish candle on daily charts which is broadly positive.

We are of the view that 17200 and 17300 would be the key support zones for the traders. As long as the index is trading above the same, the uptrend texture is likely to continue. Above which, it could move up to 17500-17550. On the flip side, for the trend following and positional traders, 17200 would be the sacrosanct support level.

The Nifty continued to inch higher along with the expanding daily upper Bollinger Band. After hovering near the 61.8% retracement of the entire decline from Oct 2021 to June 2022 (i.e. near 17300) for the last couple of sessions, the index is stretching higher. It is marginally away from its subsequent target of 17500, which is 78.6% retracement of the April–June decline.

Once that is tested then the Nifty is expected to step into a short term consolidation mode. The near term support zone shifts higher to 17150-17200. Thus the short term traders can hold on to the long position with reversal trailed to 17150. However, they need to be very cautious about their exposure in the broader end of the market & need to reduce the exposure over there.

Market has rebounded strongly with a turn in the trajectory of foreign investor flows – the last 4 sessions have seen FPI inflows of nearly USD 1 billion. A perceived pivot in the Fed’s tightening cycle and cooling off of crude oil prices have made the macro environment more favourable for India, which has outperformed EM and Asian peers by 6% in the last week.

Banks and Autos have attracted strongest flows while IT has been an under-performer. Going forward, the gap in valuations between Nifty and MSCI Emerging Markets index, as well as the gap between the earnings yield of Nifty vs 10 year G-Sec yield, would be adverse factors and we can expect market returns to be more muted. A pull-back towards the technical support at 200-day moving average at 17000 is possible.

Amidst the geopolitical storm affecting the global markets, domestic markets moved in-line with its global peers. The global market is also concerned about recessionary risk.

On the domestic front, the major trigger this week will be the RBI’s policy meeting outcome, where the market is largely expecting a 25-50bps rate hike.

Indian rupee ended lower by 45 paise at 79.16 per dollar against Tuesday's close of 78.71.

Benchmark indices ended higher in the highly volatile session on August 3 with Nifty around 17,400.

At Close, the Sensex was up 214.17 points or 0.37% at 58,350.53, and the Nifty was up 42.70 points or 0.25% at 17,388.20. About 1337 shares have advanced, 1934 shares declined, and 133 shares are unchanged.

Tech Mahindra, TCS, Infosys, Asian Paints and Titan Company were among the major gainers on the Nifty. The losers included Maruti Suzuki, Sun Pharma, Tata Motors, Kotak Mahindra Bank and Coal India.

Except Information Technology all other sectoral indices ended in the red.

The BSE midcap index fell 0.6 percent and the smallcap index was down 0.28 percent.

Brokerage hpuse CLSA has kept underperform rating on Godrej Properties and cut target price to Rs 1,523 per share. The low collections and steady spend drag the cash flows.

The maintain presales guidance of Rs 10,000 crore plus for FY23. CLSA remain cautious & cut margin estimates, reported CNBC-TV18.

Godrej Properties was quoting at Rs 1,421.85, down Rs 41.30, or 2.82 percent on the BSE.

Foreign research firm Credit Suisse has kept underperform rating on Escorts with a target at Rs 1,440 per share.

The peaking cycle, high competitive intensity and full valuations keep us on sidelines, while near-term drivers of tractor demand appear supportive.

The tractor cycle remains near its peak with high share of replacement demand. The high valuations with company facing twin challenges of margin & market share.

Credit Suisse trim FY23/24 estimates by 17%/7%, reported CNBC-TV18.