Key equity indices the Sensex and the Nifty ended in the red on July 11 primarily because of the poor show by IT and technology heavyweights such as TCS, Infosys, Bharti Airtel, HCL Tech, Wipro and Tech Mahindra and weak global cues as investors remained cautious ahead of the US inflation report which, if elevated, may result in a hefty rise in interest rates.
IT stocks suffered losses as the Q1 results of TCS disappointed investors. Analysts and brokerage firms have highlighted that the IT players may see headwinds going ahead due to weakening macro.
Sensex closed 87 points, or 0.16 percent, lower at 54,395.23 while the Nifty ended the day with a nominal loss of 5 points, or 0.03 percent, at 16,216.
Shares of Tata Steel (up 3.04 percent), Mahindra & Mahindra (up 2.86 percent), Dr Reddy's Labs (up 2.25 percent), ICICI Bank (up 1.83 percent) and Asian Paints (up 1.80 percent) ended as the top gainers in the Sensex index.
On the flip side, those of Bharti Airtel (down 5.03 percent), TCS (down 4.64 percent), HCL Tech (down 4.10 percent), Infosys (down 2.72 percent), Wipro (down 1.91 percent) and Tech Mahindra (down 1.83 percent) ended as the top laggards in the Sensex kitty of stocks.
"IT stocks led the weakness in key benchmark indices after TCS Q1 results announced on Friday failed to cheer the street. Also, the downward trend in the European markets in early trades further dampened sentiment back home," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Mid and smallcaps outperformed the benchmarks as the BSE Midcap index closed 0.63 percent higher while the smallcap index closed with a gain of 1.07 percent.
Most sectoral indices ended in the green but IT and tech stocks suffered losses. The BSE Teck index fell 3.08 percent while the IT index fell 2.70 percent.
On the other hand, the BSE Power index jumped 4.21 percent while the Utilities index jumped 4.17 percent.
"As the domestic market turned its focus towards quarterly results, the weak start of IT earnings wounded the sentiments, forcing benchmark indices to open on a weak note. However, with support from banking, metal and energy stocks, the domestic market managed to pare its losses to close flattish," said Vinod Nair, Head of Research at Geojit Financial Services.
Nair added that India’s June inflation data, which is due tomorrow, is expected to remain in line with May’s inflation rate of 7.04%. Meanwhile, the US inflation data due on Wednesday is expected to show a further increase from its current peak level of 8.6% during May.
"Most global stock markets traded lower Monday, with investors taking a cautious stance, given energy concerns in the European region and amid concerns about more Covid curbs in China, as cases rise again, could result in another round of supply chain disruption," said Deepak Jasani, Head of Retail Research, HDFC Securities.
"Nifty filled the gap made on Friday in early morning weakness and rose. A move above Friday’s close i.e 16,276 would be bullish for the Nifty while 16,011-16,026 band could offer good support," he added.
Chouhan pointed out that after the early morning selloff, the Nifty found support near 16,100 and recovered sharply.
"We are of the view that the market is likely to continue with the range-bound activity in the near future. For traders, 16,100 would act as a sacrosanct support level, while 16,300 would be the immediate resistance level. As long as the index trades above 16,100, the uptrend wave is likely to continue till 16,300-16,350 and below 16,100, the index could slip up to 16,050,” Chouhan said.
As per Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in, Nifty needs to cross 16,275 to gain strength and in that scenario, the pullback swing can further expand towards its 200-day EMA whose value is around 16,545.
"If we reobserve the candles of the last three trading sessions in isolation, it is hinting at short-term weakness which can be confirmed if the index slips below 16,115 with initial targets close to 16,000. For the time, traders are advised to go long only above 16,275 whereas shorting opportunity for intraday traders can arise below 16,115," said Mohammad.
Disclaimer: The views and recommendations made above are those of individual analysts not of MintGenie.
