Closing Bell: Nifty above 19,400, Sensex gains 556 pts; metal, power shine

Taking Stock: Market starts Sept series on a high note backed by strong GDP, PMI data

Except pharma, all other sectoral indices ended in the green with power, metal, auto, oil & gas and bank up 1-2.7 percent.... Read More

Domestic equities cheered impressive growth in India's Q1 GDP and core sector output. Nifty opened positive and strengthened during the day to close near the day’s high with gains of 182 points (+0.9%) at 19435 levels. Broader market too ended in green up almost 1%. All sectors participated in the rally, except for Pharma. Metals, Oil & Gas, PSU Bank, and Autos were major gainers today.

Upstream oil companies were in the limelight as Brent crude surged to a 1-month high on the back of tighter US inventories and Russia signalled to curb oil export.

Railway stocks continue to log smart gains on the back of a strong order book and rising allocation in the rail infrastructure. PSU banks saw fresh buying after rating agency Fitch affirmed ratings on India’s PSU Banks. Overall, we expect the market to trade in a range with sector- and stock-specific actions as the broader market momentum remains positive.

Nifty reversed the fall seen on Aug 31 and closed higher on Sept 01. At close, Nifty was up 0.94% or 181.5 points at 19435.3. Volumes on the NSE were higher than recent average. Broad market indices rose less than the Nifty even as the advance decline ratio remained firm at 1.69:1.

Asia-Pacific markets were mostly higher as China’s factory activity for August expanded and its central bank announced a cut in reserve requirements to boost the economy. European stocks were broadly higher on Friday, as investors cheered signs of more stimulus from Beijing and data showing that the downturn in euro zone manufacturing eased last month. The Eurozone manufacturing PMI increased to a three-month high of 43.50 points in August from 42.70 points in July of 2023.

India's manufacturing activity maintained its growth momentum as new orders and output increased at the quickest pace in nearly three years in August. The India Manufacturing Purchasing Managers’ Index stood at 58.6 in August, the highest since May and up from 57.7 in July.

India’s Goods and Services Tax (GST) revenues for August 2023 have shown a growth of 11 percent year on year.

India's eight core sectors posted a growth of 8.0 percent in July, slightly lower than the 8.2 percent recorded in June, but higher than 4.8% in July 2022.

Nifty formed a near Engulfing bull pattern on Sept 01. On weekly charts it rose 0.88% following the inverted hammer pattern formed in the previous week. It could now head towards 19584 while 19229 could offer support.

Bulls have regained strength and successfully defended the crucial support zone of 44,000-43,800. This area also witnesses fresh put writing, indicating strong support. The next immediate hurdle for the index is positioned at 44,500. A successful breakout above this level is likely to trigger a fresh upward movement. The overall sentiment and undertone in the Bank Nifty Index remain bullish, as long as the mentioned support levels of 44,000-43,800 are held on a closing basis.

Markets witnessed a sharp relief rally as short covering fuelled across the buying support aided by upbeat Q1 GDP numbers. This shows that despite hiccups in global macros coupled with FII outflows from the domestic market last month, India continues to buck the trend on economic growth parameters. While there will be some challenges going ahead due to weak monsoon activity, overseas funds may continue to bet on India due to signs of strong growth performance going ahead.

Technically, on daily and intraday charts the Nifty has formed a double bottom formation, which indicates strong possibility of a fresh uptrend rally from the current levels. In addition, a long bullish candle on daily charts also supports further uptrend from the current levels. For bulls now, 19350 would act as a sacrosanct support zone. Above the same, the index could rally till 19575. However, below 19350, the uptrend would be vulnerable and the index could slip till 19275-19220.

For Bank Nifty traders, 44200 would be the crucial support level, and above the same it could move up till 44700 and 45000. On the flip side, below 44200, the index could slip till 43900-43700 levels.

As indicated in the previous weekly note, Nifty50 reversed from the strong support zone of 19,200-19,250 and formed a bullish candlestick pattern to give a Bullish Flag breakout with a hidden bullish divergence in RSI. BankNifty has also reversed but it lacks momentum; a firm close above 45,000 is a must to resume its uptrend. The Auto and Metal sectors have given a much-awaited Bullish Flag and Pole formation breakout which suggests a continuation of an uptrend (Maruti: Cup and Handle Breakout, TVS Motors- Consolidation Breakout/ NMDC: Inverted Head & Shoulder breakout).

From the Energy segment, couple of stocks look strong; NTPC: Pennant and Pole Formation breakout, Tata Power: Pennant and Pole as well as Rounding Bottom Formation breakout.

9-month consolidation in the IT sector comes to an end with an Inverted Head and shoulder Formation breakout which is a reversal pattern; one can buy in small lots. With gains of 5.76%, the Realty sector regained its lost momentum and is all set to give a major breakout, one should keep an eye on the sector.

Indian equities posted healthy gains this week. Large indices like BSE-30 and NSE-50 gave weekly return of close to 1%. Indian mid-cap and small-cap indices outperformed the large-cap index. On the sectoral front, BSE Metals and BSE Realty indices saw weekly gain in excess of 5%. Other sectors that gave healthy weekly gains includes BSE Commodities, BSE Auto, BSE Capital Goods and BSE Power. On the other hand, BSE FMCG index posted negative return. India’s real GDP growth in Q1FY24 came in at 7.8%. In the near term, markets is expected to keep a close watch on impact of weak monsoons in August 2023 and rising crude oil prices.

Nifty has started the September series on a bullish note, as the index has moved above the 21EMA for the first time in several days. This suggests the potential for a bullish reversal. Additionally, the index has broken out of a falling channel, further indicating increasing bullish sentiment. Looking at the higher end of the spectrum, there is now a resistance level at 19,530 points. If the Nifty manages to breach this resistance, it could signal a continuation of the uptrend. On the lower end, there is strong support at 19,340 points.

Indian equity markets were volatile during the past week. However, over the last few months, equity markets have been buoyant on the back of the trinity of strong macro, robust earnings and flows. Mid-cap and small-cap indices outperformed the large-cap index. Foreign institutional investors (FIIs) and domestic Institutional investors (DIIs) continued to be net buyers of Indian equities. CYTD, net FII flows were strong to the tune of over USD16.5bn.

India’s macro fundamentals appear to be resilient with (1) a steady growth profile, (2) core inflation largely in check and (3) a comfortable external sector balance. As per the latest release, real GDP growth in 1QFY24 stood at 7.8% (4QFY23: 6.1%). Growth was broad-based. However, investment growth continued to outpace consumption growth.

All eyes are on the progress of the monsoons and impact of the same on the rural demand. As on 31 August, monsoons were 10% below its Long Period Average. India saw the driest August in 123 years. While we focus on monsoons, we must also keep in mind that with better irrigation techniques some of the dependence has reduced over the years. As of August 24, 2023, the total kharif acreage was 0.3% higher than the same period last year

In terms of valuations, equity markets are now trading above long term average valuations (on a one year forward P/E basis). Earnings delivery would therefore be key for the markets to sustain these valuations. Going ahead some of the factors that the markets likely would watch out for include a) consumer demand in the run up to the festive season, b) outlook on the US rate cycle and c) the trajectory of inflation in India and globally.

Indian rupee started the September month on a positive note amid upbeat domestic economic data, stronger Chinese Yuan and risk-on moods. However, by looking at the past five-year seasonal pattern, the month remained the worst in the year for the rupee as it registered a five-year average depreciation of 1.1%. This September is full of risk events, including central bank meetings, a G20 summit and make-or-break economic data, which bode well for the haven dollar.

One should remain optimistic for the local rupee as the central bank will continue to intervene on both sides to manage the unwarranted volatility. In the near term, spot USDINR is expected to trade between 82.50 to 83.10.

Indian rupee ended higher at 82.71 per dollar on Friday versus Thursday's close of 82.78.

Benchmark indices ended higher on September 1 with Nifty above 19,400 amid buying across the sectors barring pharma.

At close, the Sensex was up 555.75 points or 0.86 percent at 65,387.16, and the Nifty was up 181.50 points or 0.94 percent at 19,435.30. About 2103 shares advanced, 1456 shares declined, and 108 shares unchanged.

Top gainers on the Nifty included NTPC, ONGC, JSW Steel, Tata Steel and Maruti Suzuki, while losers were Cipla, HDFC Life, Dr Reddy's Laboratories, UltraTech Cement and Nestle India.

Except pharma, all other sectoral indices ended in the green with power, metal, auto, oil & gas and bank up 1-2.7 percent.

The BSE midcap and smallcap indices gained 0.7 percent each.