Share Market Highlights- Sensex, Nifty ends 3% high! Nifty settles above 22,600, Sensex near 74,300, Banks stocks shine ahead of RBI policy

Shares of Vodafone Idea are trading up to 12% higher on Wednesday, June 5. Despite today’s gain, the stock has declined by as much as 15% year-to-date.

Angel One Ltd shares jumped 7% on Wednesday, June 5, reaching an intraday high of ₹2,406.75 per piece on the BSE after the stockbroking firm reported its business updates for May 2024.

Commenting on the election outlook Amnish Aggarwal, Director – Research, Prabhudas Lilladher said that Indian electorate have given a fractured mandate in 2024 Lok Sabha elections after it gave BJP absolute majority in 2014 and 2019 elections which took markets by surprise resulting in ~6% cut in NIFTY. Although BJP failed to get absolute majority, NDA victory in an environment of drought (last year), higher global inflation and huge prevalence of freebies and loan waivers seems a commendable task. PM Modi is likely to be only Indian leader after Pt. Nehru to win mandate thrice. We believe portfolio allocations and future policies of NDA Govt will be a key determinant of market movements. Severe jolt to BJP in Uttar Pradesh (new PDA social engineering), Maharashtra (fractured parties) and West Bengal will keep tricky reforms regarding PSU divestment, GST, labor laws, agriculture, modern retail/ Ecom at bay.

Aggarwal also added With elections around the corner in several major global economies including USA, we would watch out for likely stand of US FED and other central banks. Incremental re-rating in PSU, Capital Goods, Infra, Defence, and Railways etc. looks unlikely given stretched valuations until policy clarity emerges. Given expected focus on rural India and normal monsoons sectors like consumer, auto, pharma, private banks, Durables etc. might come to focus, where we had recently increased weights in model portfolio.

“Oil prices are down below $73 for WTI and below $77 for Brent crude, weighed by the expectation that oil market may move into supply-surplus towards the end of the year after OPEC+ decision to phase out additional output cuts by September, near-record U.S. oil output and rising inventories globally amid weaker demand. In the session ahead, the focus will be on the U.S. weekly inventory data from EIA, which may give some clues on the demand front in the current summer driving season. Technically, the trend remains down till below 6180, downside prices may test 6060/ 5980 levels,” said Pranav Mer, Vice President of EBG, Commodity & Currency Research at JM Financial Services.

The Nifty fast-moving consumer goods (FMCG) index surged more than 6% on Wednesday, maintaining its upward momentum for the second consecutive day. The index reached a record high of 58,832.65, coming within 1,100 points of the 60,000 mark. Over the past year, the FMCG index has achieved an impressive gain of nearly 15%.

All 15 constituents of the index traded in the green today, reflecting widespread bullish sentiment in the sector. Leading the charge, stocks like Dabur, Colgate-Palmolive (India), Godrej Consumer Products, and Marico posted gains between 8% and 9%. Hindustan Unilever (HUL) shares surged over 9%, marking HUL’s biggest single-day gain since April 2020.

Also Read: HUL, Dabur, Marico among top gainers as Nifty FMCG Index extends gains, hits record highs

Vote driven by political factors; not anti-‘economic policy’ vote

“Poor outcome in select large states – Uttar Pradesh, Maharashtra, and West Bengal – restricted the ruling NDA alliance to a victory that was way below expectations and not convincing enough, as India keenly tracked the ballot count in a fitting end to its General Elections 2024. While the outcome – wherein one alliance had secured a simple majority – was not bad, that the ‘very high expectation’ bar was set early on was the problem. But the most likely scenario which is set to unfold is the NDA forming a government without any glitches,” said Elara Securities.

“With the 2024 General Election throwing up a negative shock, the power equation and possible political compulsions could lead to policy re-think by the NDA, but we do not think there will be a material change in the broad macro backdrop. Factor market reforms (land, labour, agri, capital) and political reforms could take a back seat. Fiscal consolidation remains on course, although we rule out a sub-5% GFD/GDP, with a mild skew in the spending mix in favour of regex over capex (vs. FY25 interim budget) to fix the unfavourable rural terms-of-trade. With realigning expectations of fiscal spending, the curve-steepening theme should work well. The twin deficit will continue to improve, limiting external shocks via financial channels. Volatile FPI flows will keep the RBI active on tactical interventions, but the interplay of the Fed’s rate-cut repricing and China FX strategy would stay as the key cyclical and structural FX plays ahead,” said Emkay Global Financial Services.

“In the near term defensives (FMCG, IT and Healthcare) will outperform capex-oriented sectors. Additionally, some of the sectors with strong narratives – PSUs, Defense, and Railways will take a breather and can potentially see some de-rating from the current near-all-time high valuations. Over the medium to longer term, the structural story remains intact: (EARNINGS + CAPEX + CREDIT GROWTH) and we continue to believe that India has entered a phase wherein for the next few years: Earnings growth > Nominal GDP. Hence, we continue to remain constructive on the long-term potential of the Indian market and maintain our overweight stance on Financials, Autos, Real Estate, and select Industrials/Manufacturing companies,” said Rupen Rajguru, Head of Equity Investments and Strategy at Julius Baer India.

“The ruling BJP is set to win about 240 seats and will have to take support from allies like TDP, JDS and others to reach the majority mark of 272+ seats. While most likely the NDA will form the government with Mr. Modi as the Prime Minister (BJP alone got more seats compared to the whole INDIA alliance). However, there is still a thin possibility of an adverse outcome. The market won’t like this uncertainty and we expect more correction of about 5% before the market settles.

Coalition government and economic reforms: The perception that India needs a strong majority government to pursue economic reforms isn’t entirely accurate. The coalition governments have also enacted difficult economic reforms in the past. When the BJP came into power with a full majority in 2014, the government announced the land reform bill but retreated after facing opposition criticism with “suite-boot ki sarkar” jibe. Similarly, the farm bills, which could have significantly boosted growth, were withdrawn due to pressure and protest despite BJP had full majority. Other reforms like IBC, PSU disinvestment, labour, and PLI schemes have also seen slow progress. In contrast, the government did implement the controversial demonetization of high-value notes in November 2016, just before the UP elections, which could have been very difficult to implement in a coalition government,” said Jitendra Gohil, Chief Investment Strategist at Kotak Alternate Asset Managers.

Courtesy: NSE

Hero MotoCorp, Hindustan Unilever, M&M, Tata Consumer Products, and IndusInd Bank were the top gainers in the Nifty 50. While L&T, BPCL, Power Grid, SBI, and Grasim Industries were the major losers in the Nifty 50 on June 05.

Courtesy: NSE

The NSE Nifty 50 was up 393 points or 1.80% at 22,277.85, while the BSE Sensex was up 1.75% or 1,259 points at 73,338.

Bharat Dynamics fell 10% to trigger the lower circuit at Rs 1,293.20 for the second consecutive day. Most of the defence stocks are trading in the red down due to the election results.

Country: NSE

Courtesy: NSE

Courtesy: BSE

FMCG stocks moving higher in the weak market as investors shift focus towards safe bets.

Courtesy: NSE

“The market will take some time to absorb the unexpected election results. Stability will return to the market soon but volatility will continue till there is clarity on the cabinet and the key portfolios. A sharp rebound in the market is unlikely in the near term but sectoral preferences might change. Sectors like FMCG, healthcare and IT will find increasing preferences and the momentum plays will slowdown. One positive of the sharp market correction is that the excessive valuations have moderated a bit and this will facilitate institutional buying once clarity emerges on the formation and composition of the cabinet. Investors can start nibbling at high quality largecaps in IT, financials, autos and capital goods,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Hindustan Unilever, Hero MotoCorp, Nestle India, Britannia Industries, and Asian Paints are the top gainners on NSE Nifty 50 index whereas the top laggards incude Hindalco Industries, L&T, Adani Enterprises, Power Grid Corp, and Adani Ports and SEZ.

The NSE Nifty 50 opened 0.70% higher at 22,037.65, while the BSE Sensex opened 0.68% higher at 72,568.19.

“International and domestic crude oil futures continued to ease further on Tuesday on negative carryover from Sunday when OPEC+ rolled out a plan to restore some crude production in Q4. Signs of weakness in the US economy are bearish for energy demand and crude prices after the Apr JOLTS job openings fell more than expected to a 3-year low. Meanwhile, after U.S. market hours data from API showed U.S. crude inventories unexpectedly jumped by 4.052 million barrels and was the biggest weekly gain in crude oil inventories since the last week of April. International crude oil futures have started marginally weaker this early Wednesday morning in Asian trade ahead of U.S. EIA inventory data. The consensus is that inventories will fall by 2.3 million barrels, and gasoline supplies will climb by 1.7 million barrels,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.

“In a dramatic downturn, Nifty 50 recorded its biggest single-day plunge in over four years, falling 6%, as bears took control of Dalal Street following the BJP’s failure to secure a clear majority in the elections. The Narendra Modi-led BJP leads with 293 seats, but concerns over the new government’s ability to implement bold policies weighed heavily on the market. GIFT Nifty remains subdued despite Modi’s victory speech, with technical indicators pointing to a trading range of 21000-22500. Meanwhile, WTI crude oil futures dropped to a four-month low, offering some relief. Eyes are now on the RBI’s three-day MPC meeting,” said Prashanth Tapse, Senior Vice President of Research at Mehta Equities.

The BSE Sensex rose 1.34% or 984 points at 72,971, while the NSE Nifty 50 was up 195 points or 0.89% at 22,077 in the pre-open session.

“Bank Nifty has also broken down from the rising channel indicating a change in trend. We expect the Bank Nifty to correct towards 46150 – 44000 which are the 200 day moving average and the 38.2% Fibonacci retracement level of the rise from 32300 – 51100. On the upside, 48600 – 49200 shall act as an immediate hurdle,” said Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas.

On Tuesday, Nifty witnessed a gap down opening and nosedived to close down 6% for the day. The Nifty has decisively broken down below the previous swing low of 21820, violating the higher top and higher bottom formation and suggesting a change in the short-term trend. “Our primary outlook is that Nifty shall now retrace the rise it has witnessed from 18840 to 23340 between the period October 2024 to May 2024. The crucial support levels to keep handy are 21100 which is the 200-day moving average and 50% Fibonacci retracement level of the entire upmove. A close below this support zone can lead to a further decline towards 20560 which is the 61.82% Fibonacci retracement level. On the upside, 22310 – 22550 shall act as an immediate hurdle from a short-term perspective. The range of consolidation is likely to be 21000 – 22500,” said Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas.

Foreign institutional investors (FII) sold shares net worth Rs 12,436.22 crore. Similarly, domestic institutional investors (DII) sold shares net worth Rs 3,318.98 crore on June 04, 2024, according to the provisional data available on the NSE.

WTI crude prices were trading at $73.10 up by 0.24%, while Brent crude prices were trading at $77.38 up by 0.22%, on Wednesday morning.