D-Street Wrap | Bulls take indices to record closing highs in holiday-shortened week; PSU bank, metal shares shine

Domestic equity benchmarks managed to finish a week full of see-saw moves at record peaks on Thursday, March 7, as investors prepared for a long-weekend owing to the Mahashivratri holiday on Friday. For the week, the Nifty50 rose 154.8 points, or 0.7 per cent while the Sensex gained 374 points, or 0.5 per cent, to register record closing highs of 22,493.6 and 74,119.4 respectively.

The 30-scrip index gyrated in a range of more than 1,650 points during the course of the week, while the Nifty50 largely moved within the 22,050-22,525 band. Financial stocks led the gains on Dalal Street, with index heavyweights SBI and HDFC Bank leading the charge with gains of 1-2 per cent, whereas spaces such as IT and realty remained under pressure.

"An improved macroeconomic narrative favoured banking stocks, while uncertainties in the global market led to weakness in the IT sector. The extension of the Fame II scheme and higher demand forecasts for passenger vehicles led to heavy buying in auto stocks. Faster-than-expected economic growth for the current fiscal year buoyed sentiments for metal and capital goods stocks, resulting in a rally in the respective sector indices," said Vinod Nair, Head of Research at Geojit Financial Services.  

Broader indices Nifty Midcap 100 and Nifty Smallcap 100 staged mixed moves, rising 0.4 per cent and falling 2.2 per cent respectively. The Nifty 500, the broadest index on NSE, rose 0.4 per cent for the week.

“Small and mid-cap stocks underwent corrections due to overvaluation, leading to profit booking and increased demand for large-cap stocks,” added Nair of Geojit Financial Services.

Dalal Street participants tracked mixed cues from global markets, owing to caution ahead of key macroeconomic data and central bank speeches.

Later, Fed Chair Jerome Powell indicated that benchmark interest rate cuts may not be too far off if inflation signals cooperate, in remarks to the Senate Banking Committee, offering little clarity on the exact timing of imminent reduction in post-COVID benchmark interest rates.

The Nifty Bank index, whose 12 constituents include SBI, HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda, registered a weekly gain of 548.9 points, or 1.2 per cent.

Among NSE’s sectoral indices, the Nifty PSU Bank was the biggest weekly gainer, with a rise of 3.7 per cent.

Here’s how the various sectoral gauges fared:

As many as 31 Nifty50 stocks strengthened for the week, with Bajaj Auto, Bharti Airtel, Tata Motors, Tata Consumer Products and HDFC Life rising between 5.2 per cent and 10.4 per cent, whereas UltraTech, M&M, LTIMindtree and Adani Enterprises were the top losers with losses to the tune of 3-4.5 per cent.

What next?

Many analysts expect volatility to persist in the next week, due to high valuations and global cues, with a cautious stance on the banking space from a medium-term perspective. 

"The banking sector is likely to witness some challenges in the coming period. The liquidity crunch may create obstacles for credit growth. The intense deposit competition may keep the cost to income elevated. The net interest margin improvement is subject to policy rate cuts. Hence, we expect the return ratio numbers to stay in range,” said Ajit Kabi, Research Analyst at LKP Securities.

“Going ahead, the release of US payroll data and upcoming inflation data from the US, China, and India next week will provide investors with insights into the global macroeconomic outlook,” added Nair.