India’s stocks close higher for second day on value buying
10:51, 22 December 2021
Indian stocks ended higher for a second day, the longest winning streak in two weeks, as investors increased positions on the view that the fall to a four-month lower earlier this week was overdone.
The bellwether Bombay Stock Exchange’s 30-share Sensitive index ended at 56,930.5 points, 1.09% higher from its previous close. The most-traded National Stock Exchange’s (NSE) Nifty50 index finished 1.1% higher at 16,955.4 points.
“The domestic market is gaining ground amid a positive rebound in the global market. The rebound was broad-based while mid and small caps indices outperformed as the bargain opportunity led investors to accumulate the beaten-down stocks,” said Vinod Nair, head of research at Geojit Financial Services.
“The Omicron concerns and foreign investors’ selling may keep investors in a cautious mode. It is time for selective stock picking with a focus on defensive and growth-oriented sectors rather than rushing to the market.”
All 11 sectoral indices ended in positive territory for a second successive day, with the Nifty Realty companies index gaining as much as 2.95% and the Nifty Pharma companies index gaining 1.99%.
The advance-decline share ratio – the number of advancing shares divided by the number of declining shares – on the NSE was 1,545-487 today. India VIX, the index that measures volatility in the market, today fell 5.4% to 16.5.
Above strong hurdle
“The indices opened higher and managed to hold a bullish stream throughout the day and the Nifty50 index managed to close a day above the strong hurdle zone of 16,900,” said Rohit Singre, a senior analyst at LKP Securities.
“Now it will act as strong support zone followed by the 16,800 zone, and trading above said levels one can expect a positive incoming session, so one can use a ‘buy on dip’ strategy near the supports. The immediate hurdle is coming near the 17,000-17,100 zone.”
Buying in some stocks that constitute the indices, from banking and energy sectors, also helped the benchmarks to close around the day’s high, according to Ajit Mishra, vice-president for research at Religare Broking.
One 97 Communication coverage
Stock in One 97 Communication, owner of India’s largest digital payments platform Paytm, rose after global fund manager Morgan Stanley announced a bullish rating despite a dismal listing on the bourses.
Morgan Stanley said it had initiated coverage on the digital-payment platform with an ‘overweight’ rating and a price target of 1,875 rupees, which implies 43% upside from the close on 21 December. It said it sees attractive risk to reward after the stock dropped to a record low earlier this week, and values One 97 at $17bn.
In November, One 97 raised $2.bn through a share sale and is now trading more than 25% below its 18 November debut price of 2,150 rupees. The stock closed at INR1,342.2, 2.34% higher, on the National Stock Exchange.
Zee-Sony merger
Stock in India’s Zee Entertainment Enterprises (Zee) ended higher after the company said that it had inked definitive agreements to merge with rival Sony Pictures Networks India.
The deal will spawn India’s second-largest entertainment network, and shares in Zee ended 0.46% higher at INR349.40 on the news.
Zee CEO Punit Goenka said the company would discuss the move with shareholders and investors on a conference call later today, scheduled for 17:00 hours local time (UTC+5:30).
“Zee had a healthy balance sheet and market position, but strategically the merged entity’s scale will drive better market standing [in terms of cost synergies and revenue],” fund manager Motilal Oswal Securities said on the deal.
“The merged entity’s higher competitive position in the market and synergy gains will give companies significant potential to improve profitability. Improving corporate governance and operational performance could aid in the long run significantly.”
Positive outlook
Sahaj Agrawal, head of research at Kotak Securities, expects the Nifty to trade with a positive bias in the near term but will face resistance at 17,400–17,500 levels.
“Overall consolidation is expected to continue for some weeks before markets witness a directional move,” he said.
“We remain selectively positive, with a preference for front-line stocks over the midcap space. Software and banking are expected to participate while the consumer sector is expected to underperform in the near term.”
Markets advanced as global investors’ risk appetite increased heading into the year end, despite the surging number of Omicron Covid-19 cases around the world, said Deepak Jasani, head of equity research at HDFC Securities.
“The Nifty rose but has halted near the resistance of 16,966. In case this resistance is not crossed on 23 December, then we could see Nifty correcting the latest rise before rising higher. Once this resistance is crossed, 17,192 could be the next resistance, while 16,771–16,840 could be the support band in the near term,” Jasani added.
Read more: Zee Entertainment (ZEEL) stock seesaws amid Sony merger