A report by Kotak Institutional Equities states that most companies reported a better-than-expected operating income in the Q1 results on the back of cost saving.
Indian equities rallied on Tuesday, after banking stocks along with heavyweight Reliance Industries (RIL) helped lift market sentiment. This, coupled with positive data on auto sales and strong global cues, helped cheer investors and broke the market’s four day losing streak.
The 30-share index, Sensex, rose by 748.31 points, or 2.03%, to close at 37,687.91 whereas, Nifty rose by 203.65 points, or 1.85%, to close at 11,095.25.
Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services, said, “Markets in the meanwhile have seen significant recovery from March 2020 lows. In fact, Nifty ex-BFSI has crossed pre-Covid-19 levels.
“Nevertheless, we find the risk-reward unattractive with valuations at 21 times one-year forward Nifty EPS. Hence, we would advise investors to remain defensive in their portfolio approach. Traders on the other hand are advised to stay cautious and keep booking profit at regular intervals.”
The strong movement in the day’s trading session was supported by RIL that contributed 50% to the rally in the Nifty, the other half was balanced by banks, of which HDFC Bank was the leader as the shares of the bank rose by 3.8% after it announced the appointment of Aditya Puri’s successor Sashidhar Jagdishan, who will become the new chief executive officer of HDFC Bank.
The stock jumped after the Reserve Bank of India (RBI) approved Jagdishan for the position to close at Rs 1,040.2 apiece. This also contributed to a rally in banking stocks that were beaten down for the last few trading sessions with the Nifty Bank rising as much as 1.9% during the day’s trading session.
The move comes ahead of the monetary policy meet on Wednesday.
FPIs bought stocks worth $92.6 million on Monday, whereas domestic institutional sold stocks worth $87 million.
Futures and options segment on NSE saw volumes worth Rs 14.46 lakh crore against the six month average of Rs 14.9 lakh crore.
A report by Kotak Institutional Equities states that most companies reported a better-than-expected operating income in the Q1 results on the back of cost saving. However, the brokerage was not confident if this could be retained.
“It would be imprudent to extrapolate the cost savings achieved by companies in 1QFY21 in perpetuity as companies may be compelled to eventually reinvest the savings and pass on the benefits to clients or customers for competitive reasons,” said the brokerage.
Meanwhile, the stock markets in Asia rose during Tuesday’s trade extending the Wall Street’s rally. Bourses in Asian territories such as China, South Korea and Hong Kong witnessed gains between 0.11% to 2%. This is because the Dow Jones rallied by 0.8% overnight after the strong manufacturing data coming from the United States boosted the Street’s sentiment. Dow Jones futures were down by 63 points at the time of press. European markets too, were trading tepid with bourses in the United Kingdom, France and Germany down between 0.05% to 0.49%.
The biggest gainers on Nifty were RIL, Zee Entertainment, HDFC Bank, JSW Steel, and Maruti Suzuki up by 7.4%, 6.37%, 3.8%, 3.47%, and 3.1%, respectively. The biggest losers were Tech Mahindra, BPCL, IndusInd Bank, HCL Technologies, and Tata Motors down by 2,79%, 2.48%, 2%, 1.9%, and 1.68%, respectively.