Markets extend rally for 2 straight days; Sensex shy of 61k, Nifty above 18,100; metal stocks shine

Domestic equities tracked the firmness of global counterparts after the Chinese authorities signalled to do away with its COVID-19 quarantine rule for inbound travellers. This led to bringing some comfort for investors whose sentiments have been grappled by recession fears and renewed surge in Covid spread in the past few days.

After gaining to an intraday high of 60,986.68, Sensex closed near this level at 60,927.43 up by 361.01 points or 0.60%. As for the Nifty 50, after rising to as high as 18,149.25 in intraday trade, the benchmark closed at 18,132.30 up by 117.70 points or 0.65%.

In the broader markets, smallcap stocks were outperformers. BSE Smallcap index climbed 410.29 points or 1.46%. On NSE, the Smallcap indices rose more than 1%. So far this week, smallcap stocks have been performing strongly. Midcap stocks also witnessed notable upside on both BSE and NSE.

In terms of sectoral indices, Metal stocks were the biggest winners. BSE Metal index climbed by a whopping 905.06 points or 4.59%. Similarly, on NSE, the Metal index skyrocketed over 4%. Additionally, capital goods, IT, commodities, industrials, oil & gas, telecom, power, PSU banks, and realty indices also contributed to the broader gains substantially by surging between 1-2.5%.

The top bulls were Tata Steel, Tata Motors, L&T, Asian Paint, Wipro, and Bajaj Finance. Among the top bears were major FMCG players such as HUL, Nestle, and ITC.

Talking about markets performance, Vinod Nair, Head of Research at Geojit Financial said, “With strong support from global peers, the domestic market is attempting to recoup its previous week’s losses. Metal stocks shone amid hopes of a demand revival in China on reports of loosening COVID restrictions. This, along with fears over supply disruptions from winter storms in the US, resulted in oil prices rising.”

Further, Ajit Mishra, VP – of Technical Research, Religare Broking explained that markets gained over half a percent in a range-bound session, tracking firm global cues. After the initial uptick, the Nifty surrendered all the gains in no time however buying in select index majors pushed the index to the day’s high again as the day progressed. Consequently, it settled at 18,123 levels; up by 0.6%. Most sectors participated in the move wherein metal outshined the others as it gained over 4%. Besides, further recovery in the broader indices eased the pressure.

Also, Deepak Jasani, Head of Retail Research, at HDFC Securities said, “Equities globally climbed Tuesday amid positive sentiment from China’s rollback of Covid isolation measures (raising hopes of a recovery in the world’s second-largest economy) and the cooling of a key inflation gauge in the US.”

Coming to the Indian rupee, the local unit weakened to settle at 82.8475 against the US dollar at the interbank forex market on Tuesday defying largely positive sentiment in global equities as importers added dollars to the portfolio. Notably, when the domestic cash dollar market was closed on Monday, the Indian currency witnessed its best trading day in two weeks as it ended at 82.65 per dollar on this day.

Dilip Parmar, Research Analyst, HDFC Securities said, “Month-end dollar demand from oil importers and year-end rebalancing foreign fund outflows weighed on the Indian rupee in today’s trade as it surrendered Monday’s gain. The surge in crude and precious metal prices also weighed on the local unit.”

What to expect ahead? 

On Indian markets, as per Religare Broking expert, recovery in the global indices, especially in the US, is offering the respite in absence of any major domestic trigger. The recent buoyancy in the banking pack combined with a recovery in the select index majors is encouraging however Nifty has multiple hurdles to cross before resuming the uptrend. Mishra added, “We thus reiterate our view to focus on stock-specific opportunities and maintaining positions on both sides.”

For Nifty 50, Rupak De, Senior Technical Analyst at LKP Securities said, on the daily chart, the rally stopped at the 50EMA. As long as it remains above 18,070, the trend appears to be positive. On the higher end, the index may move up towards 18,350. Support on the lower end is placed at 18,070/17,950.

Whereas on Bank Nifty, Kunal Shah, Senior Technical Analyst at LKP Securities said, the index remains in a buy-on-dip mode and might continue to trade in the broad range of 42,000-43,000. The index on a sustainable move above 43,000 will witness a sharp short covering towards the 44,000 mark.

As for the rupee, Parmar added, broadly speaking, the rupee has been stuck in the range of 82.40 to 82.90, lacking the directional move ahead of year-end. He further said, “in the near term, the rupee is expected to trade between 82.40 to 82.90 against the dollar. The bias for the local currency remains weak as long as it trades below 82.40.”

Jasani added, “As we approach the F&O expiry for the month and also the year end, we could see some heightened volatility in the markets over the next two days.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.