IT Rally Counters Losses Across FMCG, Energy, Banking

Mumbai, July 28: Indian equity benchmarks ended largely flat on Tuesday as a sharp rally in information technology stocks helped cushion losses across FMCG, energy and banking shares. The market remained volatile on expiry day, with investors weighing the fragile pause in US-Iran hostilities, softer crude oil prices and a busy June-quarter earnings season. 

The Sensex ended 69.86 points, or 0.09%, lower at 76,765.92, while the Nifty 50 declined 10.60 points, or 0.04%, to 23,985.35. Market breadth remained weak, with 1,539 shares advancing against 2,543 declines, while 155 stocks were unchanged. The broader market was mixed, with the Nifty Midcap 100 edging up 0.1%, while the Nifty Smallcap 100 fell 0.2%. 

IT stocks shine, TCS leads gains 

Information technology stocks emerged as the strongest sectoral performers, with the Nifty IT index climbing 3.3%. The rally extended the sector’s recent recovery, as investors viewed Indian IT companies as relatively insulated from concerns over the heavy capital requirements of the global artificial intelligence investment boom. 

TCS led the gains among Nifty stocks, surging 4.5%, while Tech Mahindra advanced 3.8%. Coforge soared 10.3% after results. 

The IT sector has also benefited from a recent upgrade by a broker, which moved its stance to ‘Neutral’ from ‘Underweight’. The index has gained around 6% over the past two sessions. 

The IT rally provided much-needed support to the benchmarks as selling pressure intensified across several other major sectors. 

FMCG stocks drag; HUL plunges after results 

FMCG stocks were among the biggest drags on the market, with the Nifty FMCG index falling 1.4%. Hindustan Unilever plunged 7% after the consumer goods major reported its June-quarter results, with higher costs weighing on quarterly profit. 

The sharp decline in HUL also put pressure on other consumer stocks, with Tata Consumer Products falling 2.3%. The weakness in the sector came despite gains in Nestle India, which rose 3%. 

Energy stocks fall as crude prices extend decline 

The Nifty Energy index was the worst-performing sectoral index, falling 1.7%, as oil prices extended their sharp decline amid hopes of a diplomatic resolution to the US-Iran conflict. Suzlon fell 9.6% as profit fell for the wind turbine maker in the June quarter. Coal India fell 4% after missing profit estimates and announcing it had exceeded capex target for the June quarter. NTPC also fell 2%, contributing to weakness in the broader energy segment. 

Brent crude fell 2.7% to about $86 a barrel, extending an 8.7% plunge in the previous session after US President Donald Trump said Washington was engaged in “good talks” with Iran and that a resolution was possible. 

The fall in crude prices is broadly positive for India, a major oil importer, as it can ease pressure on the import bill, inflation and corporate costs. However, energy stocks faced selling pressure during Tuesday’s session. 

Defence stocks slide; banks, metals weigh 

Defence stocks also came under pressure. Bharat Electronics fell 4.5% after its June-quarter results, with weaker-than-expected operating margins overshadowing a strong rise in revenue. 

Banking stocks remained under pressure, with the Nifty PSU Bank index declining 0.9%, while the Nifty Bank index fell 0.58%. The Nifty Private Bank index slipped 0.4%. 

The Nifty Metal index also declined 0.6%, while Nifty Infra and Nifty Media fell 0.5% and 0.34%, respectively. 

The broad-based weakness reflected continued caution among investors despite the sharp recovery in IT stocks. Twelve of the 16 major sectoral indices ended lower, underscoring the narrow nature of the market’s gains. 

Auto, pharma and realty provide support 

Some sectors bucked the broader weakness. The Nifty Realty index rose 2%, while the Nifty Consumer Durables index gained 1.08%. The Nifty Auto index advanced 0.69%, while Nifty Pharma edged up 0.2%. 

Eternal gained 4.23%, while Cipla rose 2.5%, adding to gains in select consumer and pharmaceutical stocks. 

Global cues, Fed decision in focus 

Investors are now likely to track the US Federal Reserve’s policy decision, with the central bank widely expected to keep interest rates unchanged. Markets will closely watch the Fed’s assessment of inflation risks, particularly the potential impact of geopolitical tensions and energy prices. 

For Indian equities, softer crude prices remain a positive factor, but uncertainty around the US-Iran situation and the narrow breadth of the market could keep sentiment cautious. With the earnings season gathering pace, stock-specific action is also likely to remain prominent, while the ability of IT stocks to sustain their rally could determine whether the broader market can regain momentum. 

Source

•  NSE