Sensex, Nifty slump following global market cues

• Sensex and Nifty slipped in early morning trade on Friday, following yesterday’s steep slump.
• Investors pared exposure to HDFC Bank Nestle and Reliance Industries amid a mixed trend in global markets.
• Investors are also not comfortable with the current valuations of realty and pharma shares, say experts.
  

Indian benchmark indices fell in early morning trade, a day after they saw a deep slump. Sensex fell by 133.6 points or 0.2% while Nifty slipped by 26 points or 0.13% as of 9:43 am on Friday, keeping up with Thursday’s losing streak.

The slip in the benchmarks is following the slump in the global markets. The Dow Jones, S&P500 and the Nasdaq all closed over 0.5% in the red. India’s Asian peers in China and Japan are also trading in the red at the time of publishing.

The market is delicately poised with strong headwinds and some tailwinds, say analysts. The headwinds come from the US 10-year yield rising sharply to 4%, the dollar index rising to 101.7, Brent crude rising above $83 and FPIs selling stocks for ₹3,979 crore in the cash market on Thursday.

“While these strong headwinds can impact the market, support can come from the strong US second quarter GDP number of 2.4%. Since the ongoing global rally,led by the mother market US, is primarily driven by the US soft landing narrative, this data can provide some support when the market turns weak,” said Vijayakumar.

On Thursday, benchmark indices Sensex and Nifty crashed by 0.6% each — and by 440 points or 118 points, respectively.

Investors had pared exposure to bellwethers like HDFC Bank Nestle and Reliance Industries amid a mixed trend in global markets. The Fed’s interest rate hike failed to boost sentiments in the domestic market, which saw a steep decline led by banking and auto stocks, traders said.

The stocks to watch would be Indian Oil and Marico which will declare their Q1 earnings today. ACC and Indian Hotels will be in focus too after their earnings reports on Thursday.

Limited upside potential?

Most of the investors on Thursday were on a profit booking mode. Bank Nifty came under pressure after the Fed went for a 25 basis point hike.

“The Bank Nifty index experienced a day of monthly expiry dominated by the bears, as they were in full control and overwhelmed the bulls in the market. This indicates that many traders had placed call options at this level, anticipating limited upside potential for the index,” said Kunal Shah, senior technical & derivative analyst at LKP Securities.

Shrikant Chouhan, head of research (retail), Kotak Securities says that realty and pharma shares were in the limelight after the recent correction. “Many investors are not comfortable with the current valuations, and hence are redeeming their investment on every possible opportunity," he added.

A few analysts also believe that there is value in sectors like auto, tech and healthcare in spite of the recent market rally. “Headline valuations in India look expensive. However, certain sectors are still attractive, and would require a bottom-up stock picking to create alpha for investors,” said a report by InCred Asset Management.

“Investors have to be careful chasing small-caps which are in overvalued territory. Large-caps, even when richly valued, are safe unlike risky small-caps. Pharma is staging a comeback and there is value-buying happening in beaten down metal stocks,” said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.

M&M was the biggest loser in the Sensex chart on Thursday, slumping 6.39% after it announced that it invested in RBL Bank. It was followed by Tech Mahindra, Nestle India, Bajaj Finance, Axis Bank, ITC, JSW Steel, HDFC Bank and RIL.

Sun Pharma, Tata Motors, Bharti Airtel, L&T and Infosys were among the winners, rising up to 2.1%.

(With PTI inputs)