 "Bullseye: Indices log fresh highs as big guns fire, Nifty tops 19.7K")
Benchmark indices made fresh highs on Monday with big guns -- HDFC Bank and Reliance Industries (RIL) – firing from all cylinders The Sensex ended the session at 66,590 points, with a gain of 529 points or 0.8 per cent., while the Nifty50 closed at 19,711 points, gaining 147 points or 0.75 per cent.
Shares of HDFC Bank rose 2.1 per cent after its June quarter profits and asset quality enthused investors. RIL also advanced 2.1 per cent ahead of the record date for the demerger of its financial unit. The two stocks together made a 388-point contribution to the Sensex gains. The merged HDFC Bank now has the highest weighting in the Sensex and the Nifty50 packs.
HDFC Bank, which announced its first quarterly results after the merger with its parent HDFC, reported a 30 per cent year-on-year (YoY) jump in its net profits for the first quarter of the 2023-24 financial year (Q1FY24). Its gross non-performing assets (GNPA) ratio stood at 1.17 per cent, down from 1.28 per cent in the corresponding period a year ago. Shares worth more than Rs 4,000 crore of HDFC Bank changed hands as the new shares issued on account of the merger commenced trading.
On Monday, there was buying interest in RI as brokerages advised investors to buy the stock before July 20, 2023, the record date for the demerger of its financial services arm. Analysts said that it would be a more economical way to buy shares of the financial services arm, which was likely to list at Rs 160 per share.
"People were not expecting a 30 per cent jump in profits. Investors were anticipating additional provisions on account of the merger (of HDFC twins). Many financial sector funds not having exposure to HDFC, will now have HDFC Bank's shares in their portfolio. Investors are expecting value unlocking after the demerger in Reliance Group, and there was some clamour to buy the stock,” said UR Bhat, co-founder of Alphaniti Fintech.
After gaining over 6 per cent last week, the BSE IT index added another 2 per cent on Monday but failed to sustain those gains amid profit-taking. The gauge finished just 0.26 per cent higher to finish at 31,378 points.
The gains in the index majors helped the domestic markets overcome the negative global cues triggered by China's weak GDP (gross domestic product) numbers. The loss of momentum in China's economic recovery has raised doubts about the narrative that lifting lockdowns in China will aid the global economic recovery. The economic data from the world’s second-largest economy adds to the worries about the recovery in the global economy at a time of elevated interest rates in the developed world.
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Analysts said that Q1FY24 earnings and the US monetary policy announcement this month will determine the market trajectory.
"With inflation softening in the US, there is a view that there will be a pause against a base case of two 25 basis point hikes," said Bhat
On the opening day of the week, the market breadth was favourable, with 1,993 stocks advancing and 1,676 declining on the BSE. The stock of State Bank of India, which rose 2.8 per cent, was the best-performing Sensex stock, followed by Wipro, which rose 2.5 per cent. The BSE Bankex rose 1.45 per cent, most among the 19 sectoral indices compiled by the BSE.
"The sharp surge in the banking index after a pause in the IT pack reaffirms our bullish view, and we are eyeing Nifty50 to inch towards a new milestone of 20,000 (points) gradually," said Ajit Mishra, SVP, technical research, Religare Broking.
Buying by foreign institutional investors (FPIs), who supported market gains last week, was muted on Monday as they were net buyers of Rs 73 crore. However, the gross buying remained high at Rs 8,286 crore, showed provisional data provided by stock exchanges.