Markets rebound as pharma and IT stocks hog limelight

Indian equities recovered on Tuesday after clocking its worst fall in seven months on Monday.

Markets reacted to strong global cues coming from the European markets as investors chose to focus on the $900-billion stimulus that was passed by the US House of Representatives. The Sensex rallied by 452.73 points (0.99%) to close at 46,006.69 whereas 50-share Nifty rallied 137.9 points (1.03%) to close at 13,466.3.

Foreign portfolio investors (FPIs), according to the provisional data on exchanges, sold stocks worth $43 million whereas domestic institutional investors have bought stocks worth $64.8 million.

The FPIs have bought stocks worth $5.9 million in total till December 18. The markets have seen FPI inflows for three straight months. The premium of the Indian markets has risen to the other emerging markets and BofA Securities expects a consolidation in the markets in the near term.

In its report, BofA Securities, said, “With MSCI India’s valuation premium to EM is now at 46%, which is 5% above long-term average, we think overall markets could consolidate in near term.” Additionally, market experts believe that the FPI volumes are expected to remain weak as countries around the world enter the holiday season.

The risk sentiment in the previous trading session had been severely impacted after a new novel coronavirus strain was discovered in the United Kingdom. However, there is no evidence yet that the strain is more lethal than the existing strain of Covid-19 and that the vaccines would not be effective against it. This led to the panic in the stock markets subsiding and investors chose to focus on the stimulus bill that was passed in the USA on Monday.

European markets in France and Germany were trading higher by 1.03% and 1.11%. Asian markets retreated on Tuesday over the fears of the new strain of Covid-19 with stock markets in Hong Kong, South Korea and China declining by 0.7% to 1.8%.

Shrikant Chouhan, executive vice president (equity technical research), Kotak Securities, said, “On Tuesday, since the beginning of the session, the Nifty50 index refused to fall below the 13,200 levels following strong short-covering on back of positive news flow from the US market.”

Indian shares rallied thanks to the buying in defencive sectors such as information technology and pharmaceuticals.

Both the Nifty IT index and the Nifty Pharma index gained 3.3% and 2.2% respectively. In the meantime, brokerages such as ICICI Securities expect the Nifty to touch 14,900 in calendar year 2021 if the bullish sentiment prevails in the markets.

The brokerage said, “Bull market environment prevailing in CY21 could take Nifty50 to 14,900 levels. However, if market bullishness reverts to average sentiment, the base case fundamental value is close to 13,500, which indicates flat returns for CY21.”

The futures and options segment saw a turnover worth Rs 34.7 lakh crore whereas, the cash market segment saw a turnover worth Rs 69,739.50 crore. This is against the six month average of Rs 21.7 lakh crore in the futures and options segment as well as Rs 59,316 crore in the cash market segment. The biggest gainers on Nifty were Adani Ports and SEZ, HCL Technologies, Tech Mahindra, Infosys, and GAIL up by 5.5%, 5.3%, 4.1%, 3.6%, and 3.1%. The biggest losers on Nifty were Kotak Mahindra Bank, HDFC, Bajaj Finance, Ultratech Cement Company, and IndusInd Bank down by 1.03%, 0.68%, 0.63%, 0.40%, and 0.35%.