Sensex up 131 points, Nifty at 17,457; IT stocks lead

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Benchmark equity indices opened higher ignoring the global trend however upside may be capped as investor angst over China’s real-estate sector and Federal Reserve tapering. In opening trades Sensex rose 131 points or 0.23% to 58,622 while the Nifty 50 was quoting at 17,457 advancing 60 points or 0.35%.

“The Evergrande crisis has caused a minor sell-off in markets with the Dow and S&P falling by around 1.7% each and Nasdaq and Russel 2000 correcting by above 2% each. Concerns are being expressed whether this might turn out to be China’s Lehman moment. This appears far-fetched now since Evergrande’s debt is not widely held and, therefore, is unlikely to lead to contagion with systemic risks. The recovery in Dow which was down 972 points at the lows to close with a loss of 614 points is an indication of market’s confidence that contagion is unlikely. However, investors have to be cautious since markets are richly valued and, therefore, vulnerable to corrections. The ultimate impact of the Evergrande crisis is yet to be seen and known,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

There is another view that the Chinese crisis- the regulatory crackdown earlier and the Evergrande crisis now- bode well for India, facilitating increasing capital flows to India. This may play out in the medium to long-term. The FOMC meet starting today may give a timeline on tapering. This will be watched closely by markets, globally. This is likely to be a ‘taper without tantrum’, added Vijayakumar.

Gainers & losers

Sectoral strand

Nifty IT index was leading the sectoral indices with gains of 0.59%, Nifty Realty, Nifty Bank, Nifty FMCG, Nifty Metal rose up to 0.40%. On the other hand, Nifty Auto and Nifty Pharma indices were trading with marginal losses of 0.06% and 0.02% respectively.

The volatility index India VIX spiked by 14.84% to 17.49 levels.

Broader markets

Unlike benchmark indices, broader markets were trading with losses. The BSE MidCap index declined 96 points or 0.39% to 24,502. The pain in the BSE SmallCap index was even deeper as it lost 154 points or 0.56% at 27,490.

The market breadth was negative as 1,393 shares declined compared to 911 advanced and 87 remained unchanged.

Global markets

Overseas, Asian stocks are trading lower on Tuesday as investors continue to monitor the situation surrounding embattled developer China Evergrande Group. Japanese stocks declined as they returned to trade following a Monday holiday. Markets in mainland China and South Korea are closed on Tuesday for a holiday.

Wall Street fell in a broad sell-off on Monday, as fear of contagion from potential collapse of China’s Evergrande drove investors out of equities in a flight for safety.

The US Federal Reserve is due to meet on Tuesday and Wednesday as investors look for cues on when it will begin pulling back on its bond purchases.

Fed Chair Jerome Powell will hold a press conference Wednesday at the conclusion of the two-day meeting. Powell has said the so-called tapering could occur this year, but investors are waiting for more specifics, particularly after mixed economic data released since Powell’s last comments.