Equity indices reversed losses to end higher on Tuesday, led by value buying in banking and metal shares amid firm trends in global markets ahead of the US presidential election. However, the underlying sentiment remained that of caution, especially on the part of foreign investors.
The Nifty and Sensex rose 0.9% each to close at 24,213.3 points and 79,476.6 points, respectively. HDFC Bank, ICICI Bank, Axis Bank and State Bank of India contributed to 65% of Nifty’s gains.
HDFC Bank jumped 2.6% in anticipation of an increase in weight in the MSCI Global Standard index, which could lead to $1.88 billion worth of inflows.
Despite Tuesday’s bounce bank, experts do not believe the sentiment has changed. The key events, including the US election, Fed policy meeting and China stimulus announcements – all scheduled for this week, will likely keep investors on the edge, they said.
The less than 1% gain on Tuesday marks the best day for the key indices since September 20, reflecting the underlying weak momentum.
“As we gaze into the horizon, it appears the waters may get a bit (more) turbulent for Indian equities in the short term,” Motilal Oswal Financial Services said, pointing to key factors like geopolitical risks, US elections, China stimulus and moderation in earnings growth.
“Corporate earnings, after four consecutive years of healthy double-digit growth, are moderating due to pressures from commodities and fading tailwinds from BFSI asset quality improvements. The earnings revisions have turned adverse, with downgrades exceeding upgrades,” Motilal Oswal said.
Foreign portfolio investors sold shares worth Rs 2,569.4 crore on Tuesday while domestic institutional investors bought Rs 3,031 crore of shares.
Apart from banks, shares of metal companies were among top gainers as hopes of China stimulus reviving demand from one of the world’s biggest consumers drove gains.
While the broader market, too, recovered from day’s lows, it underperformed the benchmark indices. The BSE midcap index rose 0.5% and the BSE smallcap index ended 0.4% higher.