The second straight day of stock market rally on Wednesday offered a good opportunity for investors, especially traders, to make a smart exit, according to brokerage Angel Broking. The benchmark indices closed with a 1 percent gain, following similar gains on Monday after a week-long phase of correction.
The BSE Sensex closed 321.86 points, or 1.02 percent, at 31,770 while the 50-scrip NSE Nifty gained 103 points, or 1.05 percent, at 9,897 on Wednesday. On Monday (August 14), the Sensex gained 235 points and the Nifty, 84 points.
“The kind of buying interest being witnessed in individual stocks to regain strength is certainly a worrisome factor for a contrarian trader. Hence, going ahead, we would expect the market to remain under pressure and would advise traders to use this opportunity to exit their existing longs. For the coming session, 9900 – 9940 would now be seen as a stiff hurdle; whereas on the lower side, 9830 – 9773 would be the levels to watch out for,” Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking, said in a note on Wednesday.
Tata Motors was the top Sensex gainer on Wednesday, closing 3.57 percent higher at Rs 389, followed by Cipla (up 3.54 percent), ITC (up 3.01 percent) and Hindustan Unilever (up 3 percent). The Nifty rally was led by Tech Mahindra (up 4.43 percent), Cipla, Tata Motors and Bank of Baroda.
Foreign institutional investors (FIIs) were net sellers of Indian equities worth Rs 1,090 crore, marking the fifth straight day of net sale position. On the previous four days, they were net sellers of stocks worth Rs 1,638 crore (August 14), Rs 1,943 crore (August 11) and Rs 1,171 crore (August 10) and Rs 841 crore (August 9).
Some of the stocks that hit fresh 52-week highs on Wednesday included Tata Global, Future Retail, JSW Steel, Interglobe Aviation, Tata Steel, Petronet LNG and Titan.
Among sectoral indices, the BSE Metal outperformed the Sensex, closing 1.72 percent higher. Base metal prices are likely to go up further and that could translate into a rally for select metal stocks, according to Angel Broking.
“Like nickel, copper saw a rally of 7% in July 2017 supported by favourable economic numbers from China. On one hand some macro funds have been buying copper while Chinese companies have been heavily stockpiling copper. Investments in copper capacity have seen a slowdown and that has kept the demand / supply balance for copper in favour of higher prices. The big trigger for copper could be if China continues to encourage the domestic industries to keep building copper inventories. At least, that could create a base for copper prices,” the brokerage said in a blog post.
Valuations baffling
Kotak Institutional Equities (KIE) said in an update said that the weak June 2017 quarter (1QFY18) results of Nifty companies indicated tough times for India Inc. this fiscal. “Weak quarter sets the tone for another weak year. 1QFY18 results suggest that the underlying conditions in several sectors and the broader economy continue to be weak. 1QFY18 net profits of the Nifty-50 Index declined 8.4% yoy, 1.8% lower versus expectations,” KIE analysts Sanjeev Prasad, Sunita Baldawa and Anindya Bhowmik said in a note.
“We now expect FY2018 net profits of the Nifty-50 Index to grow 1.5%. In the context of persistent disappointment in earnings, we find the market’s faith in valuations and the Street’s ability to value stocks on FY2019/20 earnings remarkable,” they added.
