Closing Bell: Market ends flat amid volatility; IT, realty, capital goods gain; auto drags

The Indian market opened on a weak note following nervousness in global markets, however, it managed to erase most of its losses to close flat, supported by positive trends in IT, Realty and Healthcare sectors.

Fed official's latest comment on a likely rate hike during March triggered selling in global equities. Globally, inflation worries worsened after the US reported a 40 year high CPI inflation reading while a slower rise in producer prices provided some relief.

Following the global peers, domestic indices too opened negative and witnessed selling pressure. Nifty, after five days of continuous positive close, ended the day on weak note with miniscule loss at 18,256 levels. Broader market ended mix with Nifty midcap 100 flat, while Nifty smallcap 100 gained 0.8%. Among sectors except for IT, Consumer durables and Realty, all other sectors ended in red.

Global markets continued to witness sell off with hawkish comments from slew of US Fed officials indicating faster interest rate hikes to combat inflation. Although UK surprised with strong growth data that helped UK markets to outperform. The U.K. economy grew by 0.9% in November.

Record high inflation in US is dampening the sentiments in other wise positive macro data environment. Moreover, markets have recovered sharply by more than 10% from its recent lows of 16,400 levels in just 20 days. Valuations are no longer cheap and require strong earnings delivery for sustenance of positive momentum in the market.

Amidst volatility, Nifty ended a tad lower and shrugged off weak global cues. After a gap-down open, the benchmark Nifty staged a smart recovery in late session amidst bargain hunting backed by short covering.

The positive takeaway was that Nifty ended a tad below the dotted lines and most importantly, shrugging off depressing overnight Wall Street cues, Asian and European cues and also taking rise in oil prices at its stride.

Technically speaking, there is likely to be lots of opportunities on the buy side as long as Nifty stays above 17889 mark. The immediate goalpost on Nifty is seen at its all-time-high at 18605 mark.

Strong guidance from many members of US FOMC about hiking interest rates in CY22, alongside continuing high inflation prints globally, make for an adverse flow environment for equities in general. The reaction to strong results from frontline IT names appears to point to heavy pre-positioning in the market, and might be a recurring theme for the ongoing results season – in that good results are priced in and fresh catalysts may be needed to push the ongoing rally further.

We anticipate strong results from frontline Banks and Metals companies and weak results from Auto, FMCG and Chemicals sectors. At an index level, we expect to see strong resistance at current levels and would anticipate a pull-back in the near-term.

Indian benchmark indices ended flat in the volatile session on January 14.At close, the Sensex was down 12.27 points or 0.02% at 61,223.03, and the Nifty was down 2 points or 0.01% at 18,255.80. About 1909 shares have advanced, 1297 shares declined, and 76 shares are unchanged.

Asian Paints, Axis Bank, UPL, HUL and ONGC were the top Nifty losers, while gainers were Tata Consumer Products, IOC, TCS, Infosys an L&T.

Among sectors, IT, capital goods and realty indices rose 1 percent each, while selling is seen in the auto, pharma, bank, FMCG sectors. BSE midcap and smallcap indices ended in the green.

Hero MotoCorp has expanded its operations and commenced retail sales at a newly opened flagship store in the country’s capital city San Salvador.

Hero MotoCorp was quoting at Rs 2,574.05, down Rs 18.55, or 0.72 percent on the BSE.

Mindtree's Q3FY22 revenue grew by a healthy 4.7%/33.7% QoQ/YoY to USD 366.4mn in a seasonally soft quarter, and was broadly in line with our expectations. EBITDAM expanded by ~ 100bps QoQ to 21.5%, ahead of our expectations on the back of operating efficiencies.

We raise our FY22E/23E/24E EPS by 3.4%/2.8%/0.5%, factoring in the Q3 operating performance beat. We maintain hold rating on the stock with a target price of Rs 4,550 at 36x Dec’23E EPS (Rs 4,450 earlier).

Mindtree was quoting at Rs 4,548.20, down Rs 195.60, or 4.12 percent.

Hindalco Industries is our preferred non-ferrous pick owing to: a) robust volume recovery in both India and Novelis, b) strong profitability in its primary Aluminum business, given its low-cost integrated operations in India (in the top quartile globally) and higher LME prices, c) solid FCF generation, which should reduce leverage sharply, and d) reasonable valuations.

The stock trades at 5.2x EV/EBITDA and 8.8x P/E on FY22E. We value Hindalco Industries at Rs 520/share on a SoTP basis. We reiterate our buy rating.

Hindalco Industries was quoting at Rs 506.85, down Rs 0.25, or 0.05 percent.

European stocks dropped in early trading on Friday after more Fed policymakers signalled they will start to raise U.S. interest rates in March to combat inflation.

Asian shares fell after Fed Governor Lael Brainard became the latest and most senior U.S. central banker to indicate that the U.S. Federal Reserve will hike rates in March.

Other Fed officials have also shown their willingness to raise rates, after data this week showed U.S. consumer prices surged 7% year-on-year.

At 0835 GMT the MSCI world equity index, which tracks shares in 50 countries, was down 0.2%, having fallen overall so far in January.

The STOXX 600 was down 0.5%, and on track for its worst week since November last year.

The Nifty Smallcap 100 index hit its record high of 11,926.5 points on optimism that the economic recovery may not be stalled by the onset of the third wave of the pandemic in the country.

With daily case loads in cities like Mumbai and Delhi appearing to be peaking, market participants have reflected optimism that the economic will be able to make a swift recovery from the third wave.

Further, market participants expressed optimism around the Union Budget, which they expect to further support the economic recovery. A strong domestic economy is considered positive for small and mid-sized companies. Dealers suggested that the outperformance of the smallcap index on a day when the Nifty50 has fallen reflects likely buying from retail investors.

Passenger vehicle wholesales in India declined 13 per cent to 2,19,421 units last month, auto industry body SIAM said on Friday.

Passenger vehicle sales in December 2020 stood at 2,52,998 units. As per the latest data by the Society of Indian Automobile Manufacturers (SIAM), two-wheeler sales also fell 11 per cent to 10,06,062 units, compared to 11,27,917 vehicles in December 2020.

Motorcycle sales declined 2 per cent to 7,26,587 units as against 7,44,237 units in December 2020. Scooter sales were also down 24 per cent at 2,46,080 units from 3,23,757 vehicles a year ago.

In October-December period of this fiscal year, passenger vehicle sales declined 15 per cent to 7,61,124 units from 8,97,908 units in the year-ago period.

Two-wheeler sales during December quarter dropped 25 per cent to 35,98,299 units as compared to 47,82,110 units in the same period a year ago.

However, commercial vehicle sales saw marginal increase at 1,94,712 units in the quarter under review against 1,93,034 units in October-December 2020.

The U.S. dollar fell for a fourth consecutive day on Friday to its lowest in more than two months as investors took the view that most of the recent hawkishness from the U.S. central bank has already been priced in.

With hedge fund positioning holding close to the highest since early 2020 and terminal U.S. rate pricing signalling peak rates at below 2%, far below the highs of previous Federal Reserve rate cycles, investors took profits on long dollar bets.

On Friday, the greenback slipped 0.2% to 94.62 against a basket of currencies, its lowest since early November. On a weekly basis, it is set to weaken 1.11%, its biggest drop since December 2020. On Thursday, it fell below a 100 day moving average for the first time since June 2021.