Sensex jumps 392 points, Nifty near 18,250; IT stocks rally

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Domestic benchmark indices opened in the green on Tuesday following a record close for the S&P 500 as traders evaluated company earnings, progress on President Joe Biden’s economic agenda and inflation risks. In opening trades Sensex rose 392 points or 0.64% to 61,359. Likewise, the Nifty 50 was quoting at 18,240 higher by 115 points or 0.63%.

“There are two important trends in the market now. One, there is selling pressure in the broader market. While Nifty is up 1.52 % for the last one month, Nifty Small-cap is down 1.11%. Nifty Mid-cap is down 8% from its peak. Two, FIIs are continuously selling in the market; they have sold Rs 10300 cr worth equity in the last 5 days in the cash market. If this FII selling sustains that would be a major drag on the market. The 8% correction in the mid-cap space is not getting reflected in the large-cap indices since stocks like RIL (10.4% weightage) ICICI Bank (7.2%) and HDFC (6.5%) have been resilient. And there are no valuation concerns in these stocks unlike the froth that has been accumulating in many stocks in the mid and small-cap space,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The run up in many micro-caps and penny stocks has been totally irrational and likely to end in grief for many retail investors chasing these ‘cats and dogs’. As the saying goes, ” we will know who all have been swimming naked only when the tide recedes.” There are clear signs of the broader market tide receding, Vijayakumar added.

Gainers & losers

Sectoral strand

Sectoral indices on the NSE opened mixed. Nifty IT index was the top gainer among the sectoral indices and was trading higher by 0.77%, followed by Nifty Pharma and Nifty Metal indices rose 0.40% & 0.37%, respectively. Nifty Auto, Nifty FMCG and Nifty Realty rallied up to 0.33%.

On the downside, Nifty Private Bank lost 0.05%.

Broader markets

After five consecutive sessions of a downtrend, broader markets took a breather, however, the upside was capped due to valuation concerns. The BSE MidCap index gained 86 points or 0.34% to 25,231 while the BSE SmallCap index was trading at 27,991 up by 155 points or 0.56%.

The market breadth was positive as 1,782 shares advanced while 634 declined and 89 remained unchanged.

Earnings today

Axis Bank, Kotak Mahindra Bank, Bajaj Finance, Cipla and Ambuja Cements among others will release their September 2021 quarter earnings today

Global markets

Overseas, Asian stocks are trading higher on Tuesday after major indexes on Wall Street rose to record closing highs.

South Korea’s economy grew at a slower pace in the third quarter, as robust exports were offset by weak domestic demand and construction and facility investments, data from the Bank of Korea showed on Tuesday. Gross domestic product (GDP) grew a seasonally adjusted 0.3% in the September quarter from three months earlier, slowing from 0.8% growth in the preceding quarter.

Major Wall Street benchmarks hit fresh records on Monday, buoyed by a robust start to the U.S. corporate earnings season and an improving economic outlook.