Sensex, Nifty open higher as FII buying keeps recovery on track

The Sensex rose 254.20 points, or 0.33%, to 77,172.05 in early trade, while the Nifty 50 gained 70.25 points, or 0.30%, to 23,881.10. The Nifty opened at 23,742.25 and moved higher in early trade, while the Sensex opened at 76,853.11.

In Short

• Markets rise for fifth straight session on FII buying and good earnings
• FMCG and financial sectors gain; IT and metal indices slip
• Market bullish above key supports; US midterms seen as key trigger

Stock markets opened higher on Wednesday, extending their recovery for a fifth consecutive session, as continued foreign investor buying and optimism around corporate earnings helped offset caution ahead of the US midterm election outcome.

The Sensex rose 254.20 points, or 0.33%, to 77,172.05 in early trade, while the Nifty 50 gained 70.25 points, or 0.30%, to 23,881.10. The Nifty opened at 23,742.25 and moved higher in early trade, while the Sensex opened at 76,853.11.

The positive start comes after both benchmark indices gained around 5% over the previous four sessions, supported by easing crude oil prices, encouraging corporate earnings and a return of foreign investor inflows.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said there has been a distinct change in market sentiment, driven mainly by a reversal in the stance of foreign institutional investors (FIIs).

"There is a distinct change in the market mood now. This has changed the market construct, too. The principal factor that has changed the market mood is the sudden reversal of the FII stance towards India. The sustained selling by FIIs have been weighing on the market for the last two years. This is changing now," he said.

Vijayakumar pointed out that FIIs had been net buyers in five of the previous six trading sessions, purchasing stocks worth Rs 18,661 crore. He added that the increasing pace of buying, strong corporate earnings and attractive valuations in large-cap stocks were providing fundamental support to the rally.

LARGE-CAPS LEAD EARLY GAINS

Buying was visible across several heavyweight stocks in early trade. State Bank of India was the top Sensex gainer, rising 1.70%, followed by ITC, which advanced 1.52%. Bharat Electronics gained 1.15%, while HDFC Bank rose 1.03%.

IndiGo, Mahindra & Mahindra, ICICI Bank, Adani Ports, Sun Pharma and Bajaj Finance were also trading higher.

On the other hand, Hindustan Unilever was the biggest laggard among Sensex stocks, falling 0.91%. Power Grid and TCS declined 0.79% each, while HCL Technologies and Infosys also traded lower. Bharti Airtel, Tata Steel, Trent and Eternal were among the other losers.

The broader market was relatively subdued compared with the benchmark indices. The Nifty 100, Nifty 200 and Nifty 500 were marginally higher.

However, the Nifty Midcap 50 slipped 0.34%, the Nifty Midcap 100 declined 0.18% and the Nifty Smallcap 100 was down 0.29%. India VIX, the market volatility index, rose 1.36% to 15.94.

SECTORAL PERFORMANCE MIXED

Among sectoral indices, FMCG stocks led gains, with the Nifty FMCG index rising 0.85%. Financial Services 25/50 gained 0.46%, while PSU Bank and Auto indices were also higher.

The Nifty IT index fell 0.43%, while the Metal index declined 0.48%. Realty, Consumer Durables, Oil and Gas and Financial Services ex-Bank indices were also trading lower.

Vijayakumar said the current recovery could have a widespread character, but large-cap stocks are likely to lead the rally because they can attract significant foreign investor flows. He also sees scope for further gains in leading financial stocks, supported by short covering.

The US midterm election outcome remains an important trigger for markets. Vijayakumar said a Democratic victory in both the House and Senate could weaken President Donald Trump's ability to push through his agenda and create uncertainty for US markets, potentially benefiting India.

From a technical perspective, Shrikant Chouhan, Head of Equity Research at Kotak Neo, said the market's near-term trend remains positive as long as key support levels hold.

"For trend-following traders, 23,500/76,000 and 23,600/76,300 would now act as key support levels. As long as the market trades above these levels, bullish sentiment is likely to continue," he said.

Chouhan sees the Nifty moving towards 23,950–24,000 and the Sensex towards 77,500–77,800. However, a fall below 23,500 on the Nifty or 76,000 on the Sensex could make the uptrend vulnerable and trigger a deeper correction.

His strategy for traders is to buy on dips while the key support levels hold.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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