Foreign investors have continued to provide support to the market as they have been extremely bullish on India in recent months. But this has taken valuations to scary levels, which is reflected in the India VIX index, indicating nervousness in the market.
“The decline in CPI inflation to 4.59 per cent is a big positive for markets. But the steady rise in crude is an area of concern. Looks like Sensex is headed for 50,000. But there are bumps ahead. The market is likely to turn highly volatile during the budget,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Since valuations are high and investors are sitting on good profits, partial profit booking can be considered at every rise. It is impossible to time the market.”
Factors driving markets:
- Inflation drops sharply: Retail inflation tumbled to a 14-month low of 4.59 per cent amid a dramatic fall in vegetable prices and contraction in overall food prices. Analysts in a poll by news agency Reuters had predicted inflation at 5.28 per cent.
- India starts shipping vaccines: Indian vaccine manufacturers have started shipping vaccines to various cities to start the inoculation drive. In the first phase, India plans to vaccinate 30 crore people.
- Strong economic rebound in US: The US economy could see a strong rebound in the second half of this year as vaccinations become widely available, but the virus is still driving the economy, and the monetary policy will remain accommodative, Boston Federal Reserve Bank President Eric Rosengren said on Tuesday.
- US releases more vaccines: The Donald Trump administration said on Tuesday that it is releasing millions of Covid-19 vaccine doses it had been holding back for second shots, and urged states to offer them to all Americans over age 65 or with chronic health conditions.
How bluechips are doing
After opening in the green, benchmark indices strengthened their lead. At 9:46 am, BSE flagship Sensex was up 245 points or 0.50 per cent to 49,762. NSE benchmark Nifty followed and added 84 points or 0.58 per cent to 14,647.
“We have achieved the 14,600 level. The key resistance patch is now between 14,650-14,750. It needs to be seen how markets react here. Is it going to resist or fly out of those levels like all other resistance levels have been treated over the past couple of months? If we can get past the 14,750 level on a closing basis, we should be headed towards 15,000. The current support range for the Nifty is 14,200-14,250,” Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.
In the 50-share pack Nifty, Bharti Airtel was the biggest gainer, up 5.06 per cent. ONGC, BPCL, Tata Motors, NTPC, Indian Oil, Adani Ports, SBI, M&M and ICICI Bank were among other gainers.
Titan was the top loser in the pack, down 1.17 per cent. TCS, HCL Tech, Britannia, Shree Cement, Kotak Mahindra Bank, Infosys and Dr Reddy’s Laboratories were other losers in the pack.
Broader market indices traded with gains outperforming their headline peers in morning trade. Nifty Smallcap added 0.73 per cent while Nifty Midcap advanced 0.79 per cent. The broadest index on NSE, the Nifty 500, was up 0.58 per cent.
Tata Elxsi, Moil, PNB Housing, BHEL, LIC Housing Finance and Tata Chemicals were among major gainers from the space while JSW ENergy, Crompton Greaves and Shriram Transport Finance were under selling pressure.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.45 per cent. Chinese shares rose 0.34 per cent, while South Korea’s KOSPI gained 0.04 per cent.
Japan’s Nikkei 225 rose 0.49 per cent, but Australia’s S&P/ASX 200 bucked the regional trend, falling 0.12 per cent. US stock futures edged up 0.15 per cent.
What to expect:
- Q3 earnings: Wipro and Infosys will release their earnings reports on Wednesday.