Markets in Dussehra spirit | The Financial Express

Markets in Dussehra spirit

The BSE Sensex closed 2.25% higher at 58,065, while Nifty50 settled at 17,274, up 2.29%.

Markets in Dussehra spirit
The brokerage has set a target of 18,400 for Nifty for March 2023, valuing it at 20x FY24 earnings versus 22x earlier, indicating an upside of 6.5% from the current levels. (IE)

Indian markets got into the festive mood on Tuesday, a day before Dussehra, with equities gaining more than 2% amid positive global cues. Weak manufacturing data in the US raised hopes that the Federal Reserve would slow its pace of policy tightening.

The BSE Sensex closed 2.25% higher at 58,065, while Nifty50 settled at 17,274, up 2.29%.

IndusInd Bank, Adani Ports, Bajaj Finance, Coal India and Hero MotoCorp were the top gainers.

All 20 sectoral gauges compiled by BSE advanced, with metal and financial services indices surging the most at 3.1% and 2.8%, respectively. The market breadth was positive with 2,572 stocks advancing compared with 874 that fell.

Also read: Myntra rolls out new festive campaign featuring Ranbir Kapoor and Kiara Advani

FPIs shopped for equities worth `1,344 crore on Tuesday, provisional data showed. Year to date, they continue to be net sellers to the tune of $22.3 billion.

“We believe the worst of the FPIs outflow is now behind us as the strong earnings growth and economic recovery will play out for the remaining months of 2022. The market will continue to be driven by macro-economic factors such as direction of the dollar index, bond yields, direction of inflation, growth in the developed world, and trend of commodity prices,” said a strategy note by Axis Securities.

The brokerage has set a target of 18,400 for Nifty for March 2023, valuing it at 20x FY24 earnings versus 22x earlier, indicating an upside of 6.5% from the current levels. “We cut the Nifty multiple to accommodate the rising interest rate scenario. Though aggressive policy tightening will help in curbing inflationary pressure, persistently elevated oil and commodity prices would continue to pose challenges to the market multiple in the next few quarters,” the brokerage said.

Asian and European stocks rallied on Tuesday after Wall Street soared overnight, fuelled by hopes that weakening US economic data would lead to a change in global central bank policy. Nikkei 225 rose 2.9% while Taiwan Weighted and Kospi gained more than 2% each on Tuesday. Britain’s decision to let go of its controversial plan to cut taxes for the highest earners, just 10 days after announcing it, boosted investor confidence.

India is the only market other than the US where equity valuations are extended versus domestic bonds, according to CLSA. At about 2 percentage points, the difference between India’s 10 year GSec yield and the Nifty’s earnings yield is at a point at which negative equity returns usually ensue. “The Nifty’s absolute PE is slightly below one standard deviation of its historical average and at levels where positive equity returns are usually not forthcoming. At the 98-99th percentile, India’s relative valuation to EMs and Asia ex-Japan is also near record highs. A simple mean reversion could drive a deep pullback,” the brokerage cautioned in a recent note.

Also read: PMGKAY extension: FCI wheat stocks to fall to buffer by January

Cool-off in the key commodity prices coupled with the central bank’s actions on front-loading the interest rates have changed the market style in the last two months. Banks, automobiles, hospitals, discretionary consumption, and domestic industrial themes look attractive in the near term over export and commodity sector themes, said Axis Securities. “Local or domestic-oriented themes are likely to perform better in the near term. We continue to believe that profitability will shift from commodity producers to commodity consumers going forward,” the brokerage said.

A long bull candle was formed on the daily chart with gap up opening. This indicates an upside breakout of the larger consolidation movement around 16,800-17,200 levels, according to analysts.

“The short-term trend of Nifty has turned up sharply after a broader range movement of the last few sessions. A decisive move above 17,300 levels is likely to pull Nifty towards the next crucial resistances of around 17,600 and next 18,000 levels in the near term. Immediate support is placed at 17,150 levels,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.