Sensex, Nifty open with mild gains, IT stocks rally

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Domestic benchmark equity indices opened with mild gains on Wednesday on rising optimism about the global economy and corporate earnings and ignoring a spike in U.S. long-dated bond yields. At open, Sensex was trading at 61,779 higher by 63 points or 0.10%. While the Nifty 50 rose 21 points or 0.11% to 18,439.

“After the 1000 point rally in Nifty in ten trading sessions the market is showing signs of high volatility in the days ahead. There is excessive speculation in cetain stocks, particularly in the broader market, which have taken some stocks to unjustifiable levels of valuations. PEs in some cases are 100, 150 and even above 200. The high level of speculative froth in many stocks is evident from the abnormal trading volumes and huge volatility in these stocks. For instance, IRCTC had trading volume of Rs 9083 cr yesterday and a price correction of around 15% from the peak. Many broader market stocks witnessed corrections of above 5%,” said VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services.

Massive selling (Rs 2578 cr yesterday) by DIIs indicates that smart money regards markets overvalued and overheated. Market direction will depend on whether the exuberant retail investors will again rush in to absorb the selling by institutions. At the present juncture safety is in high quality largecaps. The fact that high quality stocks like HDFC twins, RIL, Infosys, L&T, Kotak Bank and some others were resilient during the crash in the broader market indicates the zone of safety for investors. Traders in the broader market are likely to face stormy weather in the coming days, Vijayakumar added.

Gainers & losers

Sectoral strand

Sectoral indices opened mixed on the NSE. Nifty IT index continued its uptrend as it rose by 0.55% while Nifty Realty and Nifty FMCG were up 0.14% and 0.10% respectively.

On the downside, the Nifty Metal index tanked 0.94% and the Nifty Auto index lost 0.38% in opening trades. Whereas the Nifty Pharma and Nifty Bank were down marginally around 0.11%.

The volatility index India VIX cooled off by 8.18% to 15.96 levels.

Broader markets

Unlike benchmark indices, broader markets opened in the red. The BSE MidCap index lost 132 points or 0.50% to 26,285 while the BSE SmallCap index was quoting at 29,351 lower by 211 points or 0.72%.

The market breadth was negative as 1,822 shares declined compared to 611 advanced and 88 remained unchanged.

Earnings today

Jubilant FoodWorks, Havells India, L&T Finance Holdings, Angel Broking, Arihant Superstructures, Deep Polymers, Hathway Cable & Datacom, Just Dial, Menon Bearings, Moschip Technologies, Reliance Industrial Infrastructure, Rane (Madras), Shoppers Stop, Snowman Logistics, Supreme Petrochem, Suryalakshmi Cotton Mills, Syngene International, TajGVK Hotels & Resorts, Tata Communications, Tata Steel Long Products, Tejas Networks, and TT Ltd will release September quarter earnings today.

Global markets

Overseas, Asian stocks are trading mixed on Wednesday as China kept its benchmark lending rate unchanged. China on Wednesday kept the one-year loan prime rate (LPR) unchanged at 3.85% while the five-year LPR was also held steady at 4.65%.

U.S. stocks climbed on Tuesday as major companies continued to report strong third-quarter earnings, easing concerns that persistent Covid cases and rising costs would derail corporate America’s profit recovery.

The International Monetary Fund on Tuesday downgraded its 2021 economic growth forecast for Asia after the highly infectious Covid-19 delta variant caused a spike in cases in parts of the region. The IMF said it expects Asia’s economy to grow by 6.5% in 2021, compared with its April forecast for a 7.6% expansion. The region’s growth will be led by China and India, the fund added. The IMF expects China to grow 8% this year and India by 9.5% in the fiscal year that ends next March.