After suffering losses for the six consecutive sessions, headline indices the Sensex and the Nifty ended in the green on June 20, supported by gains in shares of select heavyweights including HDFC twins, Infosys, Hindustan Unilever, Asian Paints and TCS.
However, gains were capped as concerns over a recession due to rigid inflation and aggressive rate hikes weighed on sentiment.
As per a Mint report, "economists surveyed by The Wall Street Journal have raised the probability of recession, now putting it at 44 percent in the next 12 months, a level usually seen only on the brink of or during actual recessions."
As per a Bloomberg report, economists at Nomura Holdings Inc believe the US economy may fall into a mild recession by the end of 2022 as the Federal Reserve raises rates.
Brent Crude traded near the $112 a barrel mark while the rupee closed 9 paise higher at 77.98 per dollar.
Sensex traded volatile during the session and eventually ended with a gain of 237 points, or 0.46 percent, at 51,597.84 with 17 stocks in the green and 13 in the red. The Nifty50 closed the day at 15,350.15, up 57 points, or 0.37 percent.
"Markets finally heaved a sigh of relief and logged steady gains after early optimism in key European indices prompted selective buying in IT, finance and healthcare stocks. However, the bearish undertone can be seen from the fact that heavy selling continued in metals, oil & gas and capital goods stocks as worries of growth slowdown resulted in a fall in these stocks," Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities observed.
Shares of HDFC (up 3.97 percent), Hindustan Unilever (up 3.95 percent), UltraTech Cement (up 2.96 percent), Asian Paints (up 2.96 percent) and HDFC Bank (up 2.47 percent) ended as the top gainers in the Sensex index.
On the flip side, shares of Tata Steel (down 5.03 percent), IndusInd Bank (down 2.92 percent), NTPC (down 2.17 percent), Reliance Industries (down 1.80 percent) and Mahindra & Mahindra (down 1.54 percent) ended as the top laggard.
Mid and smallcaps underperformed strongly, indicating that the investors want to stick to largecap stocks which are considered relatively more stable than the mid and smallcap ones.
BSE Midcap index fell 1.39 percent while the Smallcap index lost 2.95 percent. Among the sectoral indices, the metal index emerged as the top loser, falling 4.46 percent. It was followed by oil and gas and energy indices which fell 3.48 percent and 3.26 percent respectively.
Even as the market benchmarks ended higher, as many as 574 stocks, including IndusInd Bank, Tata Steel, Amara Raja, Batteries, Aarti Drugs, BEML, BHEL and Biocon, hit their fresh 52-week lows in intraday trade on BSE on June 20 as the mid and smallcaps bled.
"Positive trends in the global markets inspired domestic market to trade positively with large caps gaining the most while mid and small caps continued to trade with cuts. Prevailing inflationary pressure and concerns over policy tightening limited the upside. Among the sectors, metals were the top laggard due to a sharp fall in commodity prices along with a fall in global & domestic demand," said Vinod Nair, Head of Research at Geojit Financial Services.
Technicals
Chouhan pointed out Nifty formed a double bottom formation on the intraday chart which is broadly positive for the near term. The index has also formed a 'Hammer' reversal formation on daily charts, indicating a strong possibility of a fresh pullback rally from the current levels.
"For day traders, 15,250 would be the sacrosanct support zone. And if the index succeeds to trade above the same, then the pullback rally is likely to continue in the near future and could move up to 15,500-15,600 levels. On the flip side, below 15,250, the uptrend would be vulnerable and below the same, the index could slip till 15,180-15,100,” said Chouhan.
Albeit Nifty50 closed in positive terrain with a 'Hammer' kind of formation, the advance-decline ratio sharply skewed in favour of bears as around four stocks declined for every single scrip closed in a positive zone. However, certain positive factors cropped up on lower time frame charts in the form of positive divergences apart from momentum oscillators generating buy signals, Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in pointed out.
"In today’s session, the Nifty managed to defend last Friday’s low of 15,183. It appears that the Nifty is positioning itself for a pullback rally. Therefore, as long as it sustains above 15,181, it can stage a relief rally for an initial target of 15,600. Contrary to this, a close below 15,181 can extend the weakness towards 14,900," said Mohammad.
Disclaimer: The views and recommendations made above are those of individual analysts not of MintGenie.
