Markets pause after posting their longest winning streak in three years

Take a breath after weeks of gains, focusing on selective value stocks amidst profit-taking

Indian equity markets took a breather on Monday amid profit taking after ending the last seven weeks with gains, the longest such winning streak in three years. However, the action was seen in select counters. The S&P BSE Sensex on Monday ended the session at 71,315, a decline of 169 points, or 0.2 per cent. The National Stock Exchange Nifty declined by 38 points, or 0.2 per cent, to end the session at 21,419.

Investors on Monday were mostly chasing stocks that offer some value vis-à-vis their peers. The stock of Indian Railway Catering and Tourism Corporation (IRCTC) rose by 12.5 per cent and ended the session at Rs 879.

“IRCTC was the only railway-related stock that was underperforming, and in a market like this, people are looking at stocks that have underperformed. It’s similar to the gains in holding companies in the recent past. They were not moving at all, and quite a few of them have doubled in the past few months,” said Ambareesh Baliga, an independent equity analyst.

When asked whether Monday’s correction is a pause, Baliga said one has to wait and see whether it sustains.

“In recent past, we have seen markets declining for a session or two, and then it bounces back again. The valuations are expensive, especially in smallcaps and midcaps where the action is happening. But markets at these levels don’t need triggers to increase; the liquidity moves the markets. It has got into a dangerous territory valuation-wise but can still become bigger,” said Baliga.

Stocks of sugar companies like Balrampur Chini Mills, Dwarikesh Sugar Industries, and Shree Renuka Sugars rose by 4-5 per cent as the government allowed dilution of up to 1.7 million tonnes for ethanol production.

The selective buying in the broader markets helped the combined market capitalisation of BSE-listed companies hit a new high at Rs 358.8 trillion.

Three of the five Jindal Group stocks declined after news reports said a rape case had been filed against its owner Sajjan Jindal.

Indian equity markets have been gaining over the past seven weeks amidst an easing global rate outlook, strong macroeconomic data, moderation in crude oil prices, and hopes of policy continuity in the Centre following the recently concluded state elections.

Going forward, investors will be tracking the Bank of Japan’s rate decision and inflation data from Canada, the Eurozone, and the UK. And the statements of US Federal Reserve officials for further cues.

“We maintain our bullish view and suggest focusing on buying opportunities amid consolidation. At the same time, traders shouldn’t get carried away with the prevailing momentum and stick with fundamentally sound counters. Apart from the preferred set viz., banking and information technology, we feel stocks from fast-moving consumer goods, pharmaceutical, and metal can do well, so align trades accordingly,” said Ajit Mishra, senior vice-president, technical research, Religare Broking.

The market breadth was positive, with 2,120 stocks advancing and 1,778 declining. More than two-thirds of Sensex stocks declined. ICICI Bank fell 1.6 per cent and contributed the most to the Sensex decline, followed by ITC, which fell 1.5 per cent.

Foreign portfolio investors (FPIs) were net sellers to the tune of Rs 33.5 crore, while domestic institutions were net buyers of shares worth Rs 414 crore, data from provisional exchanges showed.

So far in December, FPIs have been net buyers to the tune of Rs 52,971 crore, the highest this year.