Tuesday’s stock market session surprised investors with a remarkable comeback on the Nifty and Nifty Bank indices, marking a bullish reversal from earlier declines. For much of the day, it appeared that Monday’s market lows might be in jeopardy, with the Nifty reaching an intraday low of 23,842. However, a robust recovery, led by financial stocks, reversed this sentiment by the session’s end. Nifty closed comfortably above 24,200, while Nifty Bank surged nearly 1,000 points to reclaim levels above 52,200.

This late-day surge was spurred by significant short-covering moves, especially on the Nifty Bank. The financial services expiry, coupled with an oversold setup on technical charts, catalyzed this reversal. Not only did the Nifty and Nifty Bank reclaim ground, but most sectoral indices also joined the rally, with Metals emerging as the top-performing sector. The Metals sector continued its upward trend from earlier in the day, building on gains as other sectors followed suit. However, the FMCG and Media indices lagged, remaining subdued in an otherwise broadly positive session.

The PSU Banks also garnered investor interest, with buying activity emerging on dips ahead of State Bank of India’s (SBI) anticipated results. As India’s largest lender prepares to report its quarterly earnings later this week, investors are closely watching for signs of sustained growth, particularly as PSU Banks have shown resilience in recent sessions. The Nifty has now rebounded from the lower end of its range (23,800 – 24,300) and sits at a critical threshold. Breaking above 24,300 is seen as essential for the Nifty to register a sustainable uptrend in the coming days.

US Presidential Election Adds to Market Cues
As the US presidential election results unfold, markets worldwide are bracing for the outcome of one of the most closely contested elections in recent years. With votes being tallied, former President Donald Trump and Vice President Kamala Harris are locked in a tight race, with results from crucial swing states such as Georgia still uncertain. The political uncertainty has global financial implications, with investors weighing potential policy shifts depending on the outcome. Stock futures in the US rallied in anticipation of the election’s result, with the Dow Jones Industrial Average futures rising by over 400 points. Futures for the S&P 500 and Nasdaq also saw gains.

Global stock markets have shown cautious optimism as they await a resolution in the US election. European stocks closed slightly higher on Tuesday, with the pan-European Stoxx 600 edging up 0.06%, supported by gains in the industrial sector despite declines in auto stocks. In Asia-Pacific, markets responded positively to Wall Street’s pre-election gains. Japan’s Nikkei 225 rose 1.3%, while South Korea’s Kospi and Kosdaq indices also recorded gains.

Foreign and Domestic Investors
Amid these developments, foreign institutional investors (FIIs) continued to be net sellers in India’s cash market, offloading Rs 2,569 crore in equities on Tuesday. However, domestic institutional investors (DIIs) countered this trend, net buying for the second consecutive day, which helped cushion the market from sharper declines.

Key Results on the Horizon
Wednesday’s session brings with it an important set of July to September quarter earnings reports, especially from Nifty constituents such as Dr Reddy’s and Titan, both of which released their results post-market hours on Tuesday. Additionally, a lineup of companies including GAIL, Oil India, Mankind Pharma, and Manappuram Finance is set to report, which could add to market volatility. Manappuram Finance reported a modest 2% increase in net profit to Rs 572 crore, while its Net Interest Income (NII) rose 17.4% year-over-year to Rs 1,727.4 crore. The company’s gross non-performing assets (NPAs) increased to 2.43% from 1.96% on a quarterly basis.

For GAIL, net profit reached Rs 2,672 crore with revenues of Rs 32,911.7 crore, while its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin was reported at 11.4%. Meanwhile, results from companies in broader markets, such as Delta Corp, Endurance Technologies, Power Grid, RITES, and JSPL, are also expected to drive investor sentiment.

Stocks to Watch on Wednesday
Investors should keep an eye on the following stocks as Wednesday’s trading session unfolds:

Hindustan Zinc: The government is set to divest a 1.25% stake in Hindustan Zinc via an Offer for Sale (OFS), which begins on November 6. This move aligns with the government’s strategic divestment initiatives and could impact the stock’s supply-demand dynamics.

Hero MotoCorp: The company announced ambitious expansion plans targeting European and UK markets. With entry slated for later in the year, Hero’s international growth strategy marks a step in diversifying revenue streams.

Manappuram Finance: Reporting a year-on-year net profit increase of 2%, the company’s NII growth signals a strong core business, although rising NPAs may warrant caution from investors monitoring asset quality.

GAIL: The energy giant posted robust financial results, with a revenue figure of Rs 32,911.7 crore. Investors will likely examine GAIL’s performance closely.

Oil Prices and Treasury Yields
Oil prices fell in early Asian trade on Wednesday following data showing a larger-than-expected buildup in US inventories. Brent crude futures fell by 0.6% to $75.11 per barrel, while West Texas Intermediate (WTI) crude declined by 0.5% to $71.24. The market continues to be wary of potential disruptions from a hurricane brewing in the Gulf of Mexico, alongside cautious optimism stemming from a delay in OPEC+ production increases.

In the bond market, US Treasury yields rose on Tuesday evening as investors awaited election results. The 10-year Treasury yield was up by 7 basis points, trading at 4.6%, while the 2-year yield increased by 6 basis points to 4.27%. Treasury yields and bond prices have an inverse relationship, and the uptick in yields reflects investor anticipation of inflationary pressures and interest rate hikes post-election.

With the Nifty reclaiming critical levels, Wednesday’s trading session, which coincides with the weekly expiry for the Nifty Bank, holds significance. A break above 52,320 on the Nifty Bank index could signal further upside potential, particularly as investors await SBI’s quarterly earnings report on Thursday. Analysts suggest that sustained buying pressure in PSU banks may provide the Nifty with the momentum needed to break through its current resistance zone around 24,300.

Trends on the GIFT Nifty indicate a flat start, with futures showing a minor dip of 13 points. This suggests that traders might approach Wednesday’s session cautiously, balancing election uncertainties with influences from domestic earnings.

Story first published: Wednesday, November 6, 2024, 8:31 [IST]