Sensex, Nifty volatile in early trade; IT, pharma stocks under pressure

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Benchmark equity indices opened with mild gains on Friday, ahead of the RBI policy decision. Market participants will be reacting to the central bank’s commentary on the growth outlook, inflation projection, and liquidity measures. Sensex opened 35 points or 0.06% higher at 54,528, while the Nifty 50 added 22 points or 0.14% at 16,317.

“There are two major factors supporting the ongoing bull run: one, the strength of the mother market US, riding on the support from huge liquidity and highly accommodative monetary stance of the Fed; two, the exuberance of the retail investors who are exerting a disproportionate influence on market movements,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

While retail investor participation is a desirable trend, it is important to note the fact that the quality of retail investment – chasing low-quality cheap stocks – leaves a lot to be desired. In the long run, the majority of retail investors will be better- off investing through mutual funds. The present rising tide will eventually turn and if the market turns sharply bearish, many retail investors will be stuck with low-grade stocks causing huge wealth destruction. Retail investors, therefore, will have to exercise great caution in their investment, Vijayakumar added.

Top gainers & losers

Sectoral strand

Most sectoral indices barring Nifty IT and Nifty Pharma were in the green. Nifty PSU Bank, up nearly 1%, was the top sectoral gainer followed by Nifty Media, Nifty Auto and Nifty Private Bank.  

Broader market

The broader market opened higher outperforming benchmark indices as the BSE MidCap index rose 0.33% to 23,228 whereas the BSE SmallCap index is quoting at 26,854 up around 0.46%.

Overall market breadth was positive as 1,542 shares advanced compared to 653 declined while 70 remained unchanged.

Retrospective tax

Putting an end to the contentious retrospective tax law that hit the confidence of foreign investors, including Vodafone and Cairn, for years, Finance Minister Nirmala Sitharaman on Thursday introduced a Bill in Parliament to nullify the provision in the Income Tax Act.

RBI Monetary Policy

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is scheduled to announce its bi-monthly policy review at 10:00 IST today, 6 August 2021 at the end of the three-day meeting held from August 4 to August 6. As per reports, the RBI is likely to maintain the status quo on interest rates. The MPC, a six-member team headed by RBI governor Shaktikanta Das, had left the rates unchanged last time, citing concerns about inflation.

Earnings today

Hindalco Industries, Mahindra & Mahindra, Aarti Industries, Abbott India, Alkem Laboratories, Anupam Rasayan India, APL Apollo Tubes, Asian Granito India, AU Small Finance Bank, Balkrishna Industries, BASF India, Bharat Electronics, BEML, Berger Paints India, Graphite India, Indigo Paints, JK Tyre & Industries, Metropolis Healthcare, MTAR Technologies, Muthoot Finance, NALCO, Piramal Enterprises, SAIL, Sandhar Technologies, Sona BLW Precision Forgings, Tata Power Company, Torrent Power, Ujjivan Small Finance Bank, Voltas, and Zee Entertainment Enterprises will be releasing their April-June quarter results today.

Global markets

Overseas, Asian stocks are trading lower on Friday as investors await the release of a closely watched US jobs report.

The major U.S. equity indexes rose Thursday and the S&P 500 set a new record closing high as energy and travel stocks bounced back ahead of a key labor market report.