The minor gains on Monday were led by buying in the financials and IT stocks, with two banks featuring in the top 5 gainers of the 50-share benchmark.
The Indian equity markets ended the day flat on Monday after two straight weeks of gains on account of positive global cues. The 30-share index Sensex was up 83.34 points or 0.24% to close at 34,370.58. The broader Nifty50 was up 0.25% or 25.3 points to close at 10,167.45. The overall market sentiment remained positive with the country exiting the lockdown and restrictions being eased, but the indices gave up most of their early gains on account of profit taking.
The market, which started the day higher by more than 1%, began losing gains after the European markets opened in the red. European markets, which had started their day lower, had recovered at the time of press with stock markets in the United Kingdom, France and Germany higher by 0.1% to 0.3%. The Asian markets, too, traded flat during Monday’s session, with bourses in Hong Kong, South Korea and China rising between 0.02% and 0.24%. So, the performance of Indian markets on Monday was largely in line with its global peers. Asian shares were up owing to a catch-up rally after the US markets surged on Friday, following the release of US jobs data, which showed a surprising recovery, raising hopes that there could be a quicker global economic revival from the novel coronavirus pandemic.
FPIs remained buyers on Monday. According to the provisional data on the exchanges, they bought equities worth $107.7 million whereas domestic institutional investors sold equities worth $163.9 million. Till June 5, FPIs have bought Indian equities worth $2.59 billion. Experts suggest that a ‘buy on decline’ strategy will be better over the next few weeks. Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services, said, “Given the sharp rally witnessed over the last few days, we may see the Indian markets consolidating or taking a breather, before starting the next leg of rally. Even valuations have turned expensive at 21x FY21 estimated earnings and any negative development on the global front might derail the momentum. Hence, ‘Buying on Decline’ would be a better strategy over the next few weeks.”
The minor gains on Monday were led by buying in the financials and IT stocks, with two banks featuring in the top 5 gainers of the 50-share benchmark. Nifty Bank rose 0.7% during the day’s trading session. Financial stocks have been the top laggards in the equity market so far and are the biggest contributors to the underperformance of the Indian equity markets, compared to other global equity markets so far this year. This is because of the threat of rising non-performing assets and not enough demand- side measures from the Centre. According to Kotak Institutional Equities, investment-related sectors will take longer to recover, given the limited ability and willingness of companies, households and governments to invest in new assets or spend on large-ticket items.
In its report, the brokerage stated that it also saw the risk reward ratio of the broad Indian market middling. “We find the reward-risk balance for the broad Indian market middling post the sharp rally over the past 2.5 months. We now project net profits of the Nifty-50 Index to decline 2.2% in FY2021 and grow 33% in FY2022. However, our FY2022E EPS for the Nifty-50 Index is 21% below our pre-Covid-19 estimate, which makes us quite comfortable with our earnings estimates,” said the brokerage in its report.
The markets witnessed volumes worth Rs 67,992.6 crore against the six-month average of Rs 43,047.1 crore in the cash market, NSE data showed. On the other hand, the F&O segment witnessed volumes worth Rs 11.42 lakh crore against the six-month average of Rs 13.9 lakh crore, according to data on the NSE. The biggest gainers on Nifty were GAIL, IndusInd Bank, BPCL, Axis Bank, and ONGC, which were up by 7.51%, 7.26%, 7.03%, 6.51%, and 4.89%, respectively. The biggest losers were Zee Entertainment, Shree Cement, Eicher Motors, Mahindra and Mahindra as well as Bharti Infratel down by 4.46%, 3.9%, 3.4%, 2.67% and 2.43%, respectively. Among the broader indices, Nifty Midcap and Nifty Smallcap were up by 0.46% and 1.23%, respectively. Sectorally, the biggest gainers were Nifty IT, Nifty Private Bank, Nifty Bank, Nifty Realty and Nifty Financial Services. The biggest losers were Nifty Media, Nifty Pharma, Nifty PSU Bank, Nifty Auto, and Nifty Metal.