Closing Bell: Nifty ends above 13,100, Sensex jumps 505 pts; IT, financials shine

Taking Stock | Better GDP, auto sales push Nifty above 13,100, Sensex up 506 points

All the sectoral indices ended in the green, with the Nifty PSU bank index rose 2.8 percent, while the Nifty pharma, metal, IT and infra gained more than 1.5 percent each.... Read More

An incessant rally in domestic equity indices and slide in greenback towards two and half year lows has paved the way for a sharp appreciation in rupee of around 0.64% towards 74.44 mark, wherein it has breached the crucial barrier of 73.80 mark. More positive news about another promising vaccine candidate which looks set to be rolled out soon and upbeat manufacturing data from China has cheered the street and raised hopes of a swifter recovery.

This is leading investors to dump dollar and move towards riskier currencies, despite the warning by the Fed Chair that significant challenges and uncertainties for the US economy still remain. All eyes will now be on the Fed’s upcoming meeting, where it is likely to come out with further monetary easing measures to boost the economy, amid no further fiscal support in the last few months. Nonetheless, with the 73.80 mark being taken out, we believe that rupee can witness further strength towards the 73.00-73.10 mark in coming days.

Positive global cues and strong buying interest from FIIs helped the markets maintain its upward momentum. The dollar index is weakening and it is now at the lowest point of the last two years, which is positive for emerging markets and especially for Indian markets where governance standard has improved substantially in the last two years.

It has attracted the highest inflows for Indian equities out of total inflows for emerging markets. The most important part is that the broader market is improving, which is extremely positive for retail investors which are used to invest in mid-cap and small-cap companies. The market has formed a bullish continuation formation and based on the daily chart it is heading for 13200/13300 levels in the near term. We need to be more and more selective in terms of trading in stocks. On the flip side, 12790 would be crucial support for the market.

Markets started the week on a robust note and gained over a percent, in continuation of the prevailing trend. After flat start, the benchmark gradually inched higher as the session progressed and settled around the day’s high. Amid all, healthy buying was witnessed in sectors such as pharma, IT and real estate. Consequently, the Nifty ended on a strong note at 13,109 levels, up by 1.1%. The broader markets too remained buoyant and ended with gains in the range of 0.8-1%.

The up move in the index was largely in reaction to the better than expected GDP numbers and consistency in GST revenue figures. Now, all eyes would be on RBI’s monetary policy meet. Considering the impending event, we reiterate our positive yet cautious approach and suggest maintaining focus on the selection of stocks.

With frequency indicators and GDP data conveying meaningful rebound in economic activity and retail inflation remaining stubbornly high, we not only expect the RBI to maintain status quo in Dec-20 policy meeting, but the minimal chance of a 25bps rate cut in Feb-21 also appears to be fading away.

We also believe that the MPC may not do much on the non-interest rate tools, as significant measures (OMOs, TLTROs) have already been unleashed during the last policy meeting. The fact that liquidity remains high, while growth is gaining traction, makes us feel that RBI will adopt a wait-and-watch approach for next few months.

We will likely see RBI upgrade its growth outlook, wherein the Central bank will scale down on its earlier pessimistic GDP projection of 9.5% for FY21. Similarly, RBI will also update on the inflation trajectory, when compared with the earlier expectations of CPI moderating in Q4 FY21.

The markets started December trading on a strong footing raising the benchmark to a fresh high due to a good GDP data. The Manufacturing PMI released today showed a slight contraction in manufacturing activities compared to the previous month, though growth remained strong. Markets across the globe made a positive start to the month expecting an extension of November’s record-breaking gains along with strong hopes of coronavirus vaccine. We believe that this optimism can sustain in the near term with a shift towards mid and small caps, led by lag effect.

In the case of Nifty, the bounce that started from the level of 12790 continued on the upside today. Going ahead, the recent high of 13145, which is the high point of a bearish outside bar & an Engulfing Bear candle, will be the key hurdle to watch out for. We need to closely monitor the price action near the high as it will decide further course of action for the index. Failure to sustain near the high would push the index back into the consolidation mode. Near term support for Nifty is at 13000.

Indices were firmly in the grip of bulls as there was a left out feeling clearly visible since morning. The advance-decline ratios and he breadth was positive and even the Nifty Small Cap 100 Index was showing buoyancy as that Index itself is up only 33% since its inception.

What should a central banker do when one is seeing rising yet likely-to-cool-off inflation? When you see a good Q2 GDP growth data, yet uncertainty exists with respect to coming quarters. When you need liquidity to provide credit to real sector, yet grapple with not so high credit offtake. These could be the centre point for discussion ahead of the RBI monetary policy. We expect the RBI to be on hold yet another time – and suggest an extended pause as conflicting signals emerge from macro data points. Focus also could be on how much is the desired liquidity to ensure optimum balance between rates and monetary transmission.

Rupee scaled high and went pass 73.50 at one point during trading in NSE. The Reserve Bank of India may have bought dollar around Rs 73.45/$1, as this has led to sharp paring of losses in dollar/rupee spot market. Rupee had risen sharply to six-week low of Rs 73.45/$1 by early noon trade Tuesday on likely inflows into local stocks after MSCI announced the addition of 12 Indian stocks to its global standard indices, bunched up dollar flows after an extended weekend and a weak greenback.

Benchmark indices started the week on the stronger note with Sensex rallied over 500 points boosted by the better than expected GDP data.

At close, the Sensex was up 505.72 points or 1.15% at 44,655.44, and the Nifty was up 140 points or 1.08% at 13,109. About 1869 shares have advanced, 974 shares declined, and 169 shares are unchanged.

GAIL, Sun Pharma, IndusInd Bank, ONGC and UPL were among major gainers on the Nifty, while losers were Nestle, Kotak Mahindra Bank, Titan Company, NTPC and Bajaj Finance.

All the sectoral indices ended higher led by the PSU Bank index with nearly 3 percent gain. BSE Midcap and Smallcap indices added nearly 1 percent each.

WTI crude oil prices are trading at $44-$46 per barrel from the last one week, and all eyes are now on the OPEC meeting outcome. Meanwhile, OPEC has delayed the talks to decide its production strategy. OPEC+ ministers on Sunday could not reach an agreement on whether to delay a scheduled January crude output increase. Some members, including Saudi Arabia, are concerned about global energy markets remaining too weak, to absorb additional barrels of crude, while other members, including the UAE, want to sell more crude.

OPEC+ is currently scheduled to restore in January about 2 million of the 7.7 million bpd cut. According to a Goldman Sachs estimate, crude prices could fall about $5 a barrel if OPEC+ doesn't delay the January production increase.

However, Crude oil prices are likely to find support from vaccine optimism and strength in Chinese economic data.

Crude oil prices are likely to find support near the 20-days EMA at $43.10 per barrel, and the 50-days EMA at $41.57 per barrel. Meanwhile, a critical resistance is seen around $46.52 per barrel and $47.30 per barrel.

TVS Motor Company sales grew by 21% registering 3,22,709 units in November 2020 as against 2,66,582 units in the month of November 2019.

Total two-wheelers sales grew by 25% recording 3,11,519 units in November 2020 as against 2,49,350 units in November 2019.

Motorcycle grew by 26% recording 1,33,531 units in November 2020 as against 1,05,963 units in November 2019.

Scooter sales of the company grew by 26% registering 1,06,196 units in November 2020 as against 84,169 units in November 2019.