Positive sentiments continued to prevail in the Indian equity markets as they edged higher for the fourth consecutive day on July 20.
At close, the 30-pack Sensex was up 629.91 points or 1.15 percent at 55,397.53 and the Nifty closed higher by 180.3 points or 1.10 percent at 16,520.85
The positivity was aided by strong cues from the global markets amid the removal of levy on gasoline exports as well as a cut in windfall taxes on other fuels by the Indian government. Softening of commodity prices, good progress of the monsoon which raised hopes of increasing sowing activity and the possibility of a modest rate hike by the Reserve Bank of India in its August review also played positively on the minds of investors.
Earlier, the strong closing in the US markets on July 19 and gains in the Asian markets enabled the Indian indices to open with healthy gains, which they were able to maintain through most part of the day. However, strong profit booking in the last 30 minutes of the day resulted in the indices paring some losses to close below their day’s opening.
“Indian stocks led a steady climb as a result of encouraging signals from both domestic and international markets as reduced export duty and windfall taxes improved the mood of oil producers,” said Vinod Nair, Head of Research, Geojit Financial Services.
Strong quarterly results in the US market boosted the rally, while the European market rose as worries over Europe's energy supply eased.
“If sustained buying from FIIs prevails, it will provide a cushion to the upward rally in the domestic market,” Nair added.
Tech Mahindra, ONGC, HCL Technologies, TCS and Reliance Industries were among the top gainers on the Nifty while the top losers were HDFC Life, M&M, Eicher Motors, Sun Pharma and Adani Ports.
Among sectors, the Nifty IT index led the pack of gainers as it gained 2.93 percent today while the FMCG and Metals index added more than a percent each. Auto and Realty were the two losers as they lost close to 0.2 percent each in today’s trading.
“Global stocks inched higher on Wednesday amid speculation that the worst of this year’s equity rout may be over, even as concern over the potential for a global downturn sparked by hawkish central bank lingers,” said Deepak Jasani, Head of Retail Research, HDFC Securities. Chinese tech stocks advanced following a report that regulators are wrapping up an investigation into Didi Global Inc. with a hefty fine, with traders again hoping this will herald an end to a crackdown on the sector.
Stocks and Sectors
On the BSE Telecom and Power each lost 0.5 percent while Utilities were down 0.44 percent. Auto and Realty indices shed close to 0.3 percent each. Rest all sectoral and broader indices closed positive on the BSE.
BSE Midcap ended with a gain of 0.25 percent while BSE Smallcap edged higher by 0.42 percent.
The India VIX, which indicates the degree of volatility traders expect over the next 30 days, declined 2.20 percent from 17.20 to 16.82.
Among specific stocks, a long build-up was seen in L&T Technology Services, Vedanta and Persistent Systems while a short build-up was witnessed in ICICI Lombard General Insurance, Polycab India and HPCL.
Of the 3,489 stocks traded on the BSE, there were 1,930 advances, 1,424 declines while 135 stocks remained unchanged.
Outlook for July 21
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd
The market is mirroring the mood in global equities and notched up significant gains on strong buying in IT and select media and realty stocks. Basically, the market is hoping that the US Fed may not be aggressive in hiking rates in its next meeting, while falling commodity and crude oil prices too have moderated the bearish trend in recent sessions.
On the technical front, the Nifty has formed a small bearish candle near the important resistance level. Due to markets being in a temporary overbought situation, we could see some profit booking at higher levels. For bulls, 16,550 and 16,600 would act as an immediate resistance zone. On the flip side, 16,450-16,400 could be key support levels
Deepak Jasani, Head of Retail Research, HDFC Securities
The Nifty broke out upwards with an up-gap on Wednesday but closed near the intra-day lows, suggesting profit taking at highs. While volume expansion is supportive of further up-move, we will have to see whether the up-gap made by the Nifty at 16,359 is filled or not in the next 1-2 days. The Nifty could now remain in the 16,359-16,646 band for the near term.
Ajit Mishra, VP - Research, Religare Broking Ltd
Markets extended gains for the third consecutive session, tracking favourable cues. Firm global cues combined with news of the government cutting back windfall tax led to a gap-up start. The tone remained firm in the first half, thanks to the continued rebound in IT, metal and energy pack. However, profit taking in the latter half trimmed gains. Finally, the Nifty index settled at 16,520; up by 1.1 percent. Meanwhile, the broader indices underperformed and closed flat to marginally higher.
We may see some consolidation in the index after the recent surge. However, the bias would remain on the positive side till the Nifty upholds 16,250 levels. Most sectors are now contributing to the move on a rotational basis so the focus should be on stock selection. Needless to say, global cues and earnings would continue to trigger volatile swings in between.
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