Volatile market sees broader indices outperform benchmarks; IT, realty regain shine

Volatility ruled the Indian market driving it down 0.5 percent in the week ended May 19 amid mixed global cues with concerns rising over the US debt ceiling. However, better earnings and foreign institutions provided support at lower levels.

The BSE Sensex fell 298.22 points or 0.48 percent to end the week at 61,729.68, and the Nifty50 shed 111.4 points or 0.60 percent to close at 18,203.40.

The Sensex and the Nifty added 1 percent and 0.77 percent each so far this month. For the week, the BSE Mid-cap index ended on flat note, the Small-cap index rose 0.4 percent, while the Large-cap index declined 0.6 percent.

“The domestic market’s rally, supported by FIIs and domestic investor inflows, faced headwinds this week from weak cues in global markets. The moderation in domestic inflation reaffirmed the central bank’s decision to maintain a pause on rate hikes. India’s industrial production growth slowed from 5.6 percent in February to 1.1 percent in March, mainly due to weaker performance in the power and manufacturing sectors,” said Vinod Nair, Head of Research at Geojit Financial Services.

Nifty50 stocks that have reported results so far witnessed earnings growth of 9.7 percent, falling short of the estimated 10.6 percent, while the Nifty 500’s earnings improved by 11.7 percent compared to the estimated 8.9 percent, indicating the outperformance of mid- and small-caps.

“The US market grappled with concerns of a potential recession and uncertainties surrounding debt ceiling talks. However, positive developments in both areas later boosted the US markets. Despite market fluctuations, FIIs continued to provide support to the domestic market. The lower levels of India’s VIX reflect market stability, instilling investor confidence and promoting long-term investments,” he said.

Among sectors, the Nifty Pharma index fell 3 percent, the Media index down 2 percent, and the Oil & Gas index down 1.8 percent, while the Nifty Realty and the Information Technology indices gained 1 percent each.

The BSE Small-cap index was up 0.4 percent. Repro India, Aurionpro Solutions, Shakti Pumps (India), Ddev Plastiks Industries, Kokuyo Camlin and Indo Amines rose 24-45 percent.

On the other hand, Shreyas Shipping, Subex, Automotive Axles, JK Tyre and Industries, Ethos, National Fertilizers, TV Today Network, Thirumalai Chemicals and Solara Active Pharma Sciences fell 10-20 percent.

“Domestic equity markets corrected a bit this week. Global markets were mixed during the week amid concerns around the US debt ceiling. On the sectoral front, most indices declined during the week. However, BSE IT and BSE Realty posted gains this week,” said Shrikant Chouhan, Head of Equity research (Retail), Kotak Securities.

India’s April macro factors have seen improvement with record GST collection, improved PMI numbers, trade deficit narrowing to near two-year lows, and sharp softening in headline and core inflation.

“FIIs have been net buyers of Indian equities in recent weeks. The weak global growth outlook continues to persist, even as inflation witnessed moderation. Stocks-specific action will continue as companies continue to declare their Q4FY23 results,” Chouhan said.

Foreign institutional investors (FIIs) bought equities worth Rs 4098.2 crore this week, while domestic institutional investors (DIIs) sold equities worth Rs 677.45 crore.

However, in the month till now, FIIs purchased equities worth Rs 17,376.31 crore and DIIs sold equities worth Rs 4,674.68 crore.

“Going ahead, markets will also keep a tab on monsoon movement. In the latest update, the IMD expects the onset of monsoon over Kerala is likely to be slightly delayed,” Chouhan pointed out.

Where is Nifty50 headed?

Osho Krishan, Sr Analyst – Technical & Derivative Research, Angel One

The recent correction was certainly expected after the decent run and the overall chart structure remains robust, with bulls firmly able to withhold the pivotal support. Even on the hourly chart, the formation of the ‘Wolfe Wave’ pattern with the positive divergence in the RSI-smoothened contributes to the positive development for the index, and we may expect the runup to continue in the coming period.

On the technical levels, the 18,050-18,000 was firmly safeguarded, showcasing the importance of pivotal support and is expected to act as a sheet anchor in the comparable period. On the higher end, 18,400-18,450 is likely to act as the sturdy wall and a decisive breach would only trigger fresh longs in the system in the future.

We remain sanguine with a robust approach post the price-wise correction in the index. Also, the banking index is nearing the lifetime high zone, and any breach could contribute to the upliftment of the market sentiments. Simultaneously, amidst the broader market participation, one needs to keep a stock-centric approach for better trading opportunities and stay abreast of global developments.

Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas:

The positive divergence on the hourly momentum indicator indicated loss of momentum on the downside which in turn helped the upmove. Thus, both price and momentum indicator suggest that there could be further upmove over the next few trading sessions.

In terms of levels, 18,300 – 18,350 is the immediate hurdle zone while 18,100 – 18,050 shall act as a crucial support zone for the Nifty. Overall, we still believe that the Nifty is in a consolidation mode and the range of consolidation is likely to be 18,000 – 18,400.

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