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Nachiket Kelkar
Nachiket Kelkar

MARKET ROUNDUP

Market in consolidation phase, treads path of caution

Bombay Stock Exchange [File photo] Some cautiousness may have crept into the market after it hit fresh all-time highs earlier this week

Auto, metal stocks major gainers this week; IT, pharma stocks hit by domestic, global cues

India's benchmark equity indices, wiped off losses from the morning session and closed slightly higher on Friday following late buying in auto, realty, metals and banking stocks, tracking up moves in European markets, which shrugged off parliamentary election results in Britain, where no party has got a clean majority.

The Bombay Stock Exchange's Sensex closed up 49 points or 0.2 per cent at 31,262.06 points and the wider NSE Nifty 50 index ended at 9,668.25 up 21 points or also 0.2 per cent.

For the week, the Sensex ended down 0.03 per cent, while the Nifty was up about 0.1 per cent.

Some cautiousness may have crept into the market after it hit fresh all-time highs earlier this week. Sensex touched a life-high of 31,430.02 in intraday trade on June 6 and analysts feel the markets could trade within a band, although there will continue to be action in individual stocks.

“Market is in a consolidation phase, and is not giving any direction up or down. Stock specific moves can be seen,” said Siddharth Sedani, vice-president at Anand Rathi.

Among major gainers on Friday, Maruti Suzuki closed up three per cent, while Tata Motors rose 1.4 per cent. Metal stocks continued to rally and companies like Tata Steel, Hindalco, JSW Steel and Vedanta were up 1.5 per cent to 4.5 per cent. 

Foreign brokerage CLSA said earlier this week that Indian steel demand-supply gap was on the cusp of multi-year tightening phase given the lack of capacity additions, while steel demand was improving.

Realty stocks were also among the gainers, with Phoenix Mills, Indiabulls Real Estate and DLF rising over four per cent.

IT and pharma stocks, on the other hand, were among the key losers. Infosys, fell almost 3.5 per cent after a report said that the promoters were looking to sell their entire stake in the country's second largest software services exporter. The stock pared some of the losses and closed 0.8 per cent lower after the promoters as well as the company denied any such move. 

Major European markets were also largely trading higher with the FTSE100 up 0.6 per cent, the German DAX up 0.4 per cent and France's CAC 40 rising 0.5 per cent. Asian markets were mixed, with Japan's Nikkei Stock Average gaining 0.5 per cent, Korea's Kospi rose 0.8 per cent, but Hong Kong's Hang Seng declined 0.1 per cent.

Analysts say any adverse development globally could lead to some correction in the domestic equity market. However, with fund flows remaining strong, there could be further buying even if there was a three to five per cent correction.

“We have seen record infusion into equity funds in May. So, even if markets were to go down, it wouldn't be sustainable as there is enough liquidity that is available,” added Sedani of Anand Rathi. 

In May, equity mutual funds saw inflows of Rs 10,790 crore, highest for a month in almost two years. Assets under management of equity mutual funds scaled a record high of Rs 5.83 lakh crore at the end of May 2017. Foreign institutional investors also have pumped in Rs 49,447 crore so far in calendar 2017.

Some analysts though struck a note of caution. Foreign brokerage UBS has downgraded Indian equities to “neutral” from “overweight” citing high valuations and expectations that the Reserve Bank of India is unlikely to cut interest rates this year.

Investors will be now keenly watching any moves on interest rates from US Federal Reserve later this month and how the Brexit process now pans out with a hung parliament in the UK. Domestically, with the fourth quarter earnings now behind us, the progress of the monsoon and roll out of GST will be high on investors' watch.

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