After the kneejerk reaction on May 4 to the unscheduled interest rate hike by the Reserve Bank of India that sent the Indian stock markets in a tailspin, the 50 bps rate hike announced by the US Fed brought some relief rally in the global stocks. The US markets ended higher in yesterday’s trade and the Asian markets responded positively in the early morning trade. They however pared gains and ended on a flat note.
The Indian markets were no different and had a strong opening in the morning but volatility crept in during the post-lunch session due to profit booking when the markets pared all their gains and landed from where they had started in the morning.
The 30-pack BSE Sensex ended flat with a marginal gain of 33.2 points or 0.06 percent at 55,702.23, while the Nifty closed the day with a minor gain of 5.05 points of 0.03 percent at 16,682.5.
The fear of an aggressive rate hike by the US Fed was the prime reason for global volatility during the past few days. “Fed’s decision to remain less hawkish with a 50bps rate hike downplayed the investor’s worries, helping the global markets to rally," said Vinod Nair, Head of Research, Geojit Financial Services.
However, domestic market trimmed its gains towards the end of the day following a sell-off in US futures, added Nair.
In the morning, the Indian indices tracked gains in US and Asian markets and opened with a gain of more than 1 percent. The BSE Sensex had a gap up opening of 586 points at 56,255 points. It gained further to create an intra-day of 56,566.8 within the first hour trading. The sentiments, however, changed and turned the tide down resulting in a wild swing of 953 points from the day’s high as the market touched an intra-day low of 55,614.
The Nifty opened with a gap of 177.15 points or 1.1 percent higher at 16,854.75, reaching an intra-day high of 16,945.7 before dropping 294 points to create an intra-day low of 16,652.
Stocks & Sectors
Amidst the volatility, the sectoral indices on the Nifty ended on a mixed note with Nifty IT gaining the most by 2.07 percent. Metals and Auto indices gained 0.62 and 0.42 percent each while all other sectors the day in red. Nifty Realty index was the biggest loser of the day as it tanked 1.62 percent with Pharma and Bank following behind.
The broader markets also had a mixed day today but BSE Midcap lost 0.21 percent and BSE Smallcap declined 0.32 percent.
The India VIX, which indicates the degree of volatility traders expect over the next 30 days, skid lower by 7.24 percent from 21.88 levels to 20.29.
Tech Mahindra, Hero Motocorp, Infosys, HCL Tech and Wipro were the top gainers on the Nifty, each gaining between 1.9 to 4.2 percent.
On the losing side, IndusInd Bank, Tata Consumer Products, Britannia, Nestle and UltraTech Cement were the top losers, losing between 2.55 to 4.2 percent.
Among specific stocks, short build-up has developed in Intellect Design Arena, Godrej Properties and CanFin Homes while long build-up was seen developing in ABB, Siemens and Tech Mahindra.
Outlook for May 6
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd
Markets erased most of its early gains due to profit taking in realty stocks, pharma and PSU banking stocks. The early momentum failed to sustain as investors turned risk averse amid worries of high inflation and prospects of more rate cuts that will slow growth going ahead. Another factor is investors are pulling out funds from secondary markets and infusing in the ongoing LIC IPO.
Technically, after a sharp fall, the Nifty has formed an inside bearish candle and is also holding lower top formation on intraday charts, indicating further correction from the current levels. As long as the index is trading below 16,850, the correction wave is likely to continue and below the same the Nifty could touch the level of 16,600-16,500. On the flip side, 16,800 and 16,850 would act as immediate hurdles. Above 16850, the market could hit the level of 16,950.
Ajit Mishra, VP - Research, Religare Broking Ltd
Markets settled almost unchanged in a volatile trading session, taking a breather after the sharp decline. The tone was upbeat in the beginning, in reaction to the US Fed meeting outcome, which came in line with the market expectations. However, the gains fizzled out as the session progressed and the Nifty finally settled around the day’s low to close at 16,682 levels. Amongst the sectors, IT, Power and Capital Goods ended with gains whereas Realty, Healthcare and FMCG ended with losses. The broader markets too ended on a flat note.
With all the major events behind us, the focus would return to earnings and upcoming macroeconomic data. We reiterate our bearish bias in Nifty and suggest continuing with the “sell on rise” approach. Stocks, on the other hand, are offering opportunities on both sides so traders should align their positions accordingly.
Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities
Nifty short term sentiment remains negative. Resistance for Nifty50 is seen at 16950 below which bias remains negative. Medium term trend support for the index is seen at 15500. Select energy stocks trade with positive bias while Cement stocks expected to remain under pressure.
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