Auto, bank stocks lift Sensex amid low-level buying: Key factors driving D-St rebound

Auto, bank stocks lift Sensex amid low-level buying: Key factors driving D-St rebound

NEW DELHI: Low-level buying, especially in auto and banking stocks, lifted the benchmark indices on Friday, even as the threat of Covid second wave continued to grow and rising bond yields turned investors cautious.

The underperformance of the Indian market during the last many days has been striking. The prime mover of this downtrend in the market has been the FII selling, which, in turn, has been triggered by concerns surrounding the impact of the second wave of Covid outbreak, said an analyst.

“The second wave is unlikely to have a major impact on growth and corporate earnings. But the jury is still out on this. This exceedingly volatile phase of the market is turning out to be a difficult terrain for traders. For long-term investors, dips will provide opportunities to buy quality stocks. IT, financials, cement and chemicals are good bets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.


Good News

  • Low level buying: After a sharp fall in the market in the last couple of days, the indices are trading at their early February levels, leading to resumption in buying at lower levels.
  • Biden’s vaccine push: Asian and US markets gained after US President Joe Biden doubled his target for administering the vaccines crucial for economic revival.
  • Unemployment falls: The number of Americans filing new claims for unemployment benefits dropped to a one-year low last week.

Bad News

  • Crude oil prices tick up: Crude prices veered back up toward $60 a barrel as investors weighed the implications of a huge container ship still stuck in the Suez Canal.
  • US bond yields rise: Ten-year US Treasury yields rose slightly after another lackluster auction of seven-year notes. The reaction was muted compared with the upheaval in bonds and interest-rate sensitive stocks following poor demand at last month’s sale.
  • US dollar showing strength: The dollar headed for its best week in three. The Dollar Index is nearing the Golden Cross after it breached the 200-day moving average. Strength in the greenback is considered a weak signal for emerging market equities.

How are the blue chips doing

After opening in the green, benchmark indices moved slightly lower. At 9:55 am, BSE flagship Sensex was up 281 points or 0.58 per cent to 48,721. NSE benchmark Nifty followed and rose 106 points or 0.74 per cent to 14,431.

“The index has opened the new series with a gap up opening. That is because it has bounced from a strong support of 14,300-14,350. This should not be considered as a reversal in the trend. The markets might be taking a breather. The short-medium trend will turn positive only post a closure of 14,750-14,800. Until then any rally up can be assessed to go short on the Nifty. If we manage to break the lows of yesterday, we could slide down to levels closer to 14,000,” said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.

In the 50-share pack Nifty, Bajaj Finserv was the biggest gainer, up 2.94 per cent. Tata Motors, Hindalco, HUL, GAIL, Bajaj Auto, BPCL, HDFC, Asian Paints and NTPC were among other gainers.

Power Grid was the top loser in the pack, down 1.76 per cent. Dr Reddy’s Labs, ONGC, Reliance Industries, Cipla, Sun Pharma, TCS and UPL were other losers in the pack.

Broader markets

Broader market indices were trading with gains, outperforming their headline peers. Nifty Smallcap was up 0.95 per cent while Nifty Midcap advanced 1.16 per cent. The broadest index on NSE — the Nifty 500 — was up 0.86 per cent.

Chola Finance, Godrej Properties, Vodafone Idea, Welspun India, Indiabulls Real Estate and Lux Industries were gainers from the space while DCB Bank, Persistent Systems, Inox Leisure, Edelweiss Financial, Future Retail and Mphasis were under selling pressure.

Global markets

MSCI’s ex-Japan Asia index rose 0.37 per cent after hitting a near three-month low on Thursday, while the Shanghai Composite Index gained 0.78 per cent, snapping a three-day losing streak.

Japan’s Nikkei rose 0.89 per cent after Wall Street shares staged a rally, driven by cheap, cyclical stocks that have been battered by the pandemic.

The Dow Jones Industrial Average rose 0.62 per cent and the S&P 500 gained 0.52 per cent while the Nasdaq Composite added just 0.12 per cent.

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