Benchmark stock market indices rebounded after a period of losses, showing substantial gains in early trade, driven by a strong rally in the metal, banking, and auto sectors. This uptick in market performance was fueled by the latest inflation data for December, which revealed a slight easing in retail inflation, dropping to a four-month low of 5.22%. This positive news provided much-needed relief to investors, sparking renewed optimism in the market.
As of 9:30 AM, the S&P BSE Sensex surged by 408.52 points, reaching 76,738.53, while the NSE Nifty50 climbed 110.05 points to 23,196.00. The market’s upward movement was supported by easing inflationary pressures, which alleviated concerns about the possibility of further interest rate hikes and bolstered investor confidence in the short-term economic outlook.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained that the broader market’s overvaluation concerns were now coming to fruition, leading to the correction in large-cap stocks. He emphasized that a reversion to mean valuations was taking place, reflecting a more realistic market scenario. Vijayakumar highlighted several contributing factors to the correction: the strengthening of the US dollar, rising 10-year US bond yields above 4.7%, uncertainty surrounding Donald Trump’s post-inauguration actions, signs of a slowdown in India’s economy, weak corporate earnings, and the surge in crude oil prices. These factors have combined to put pressure on the equity markets, leading to the correction seen across multiple sectors.
NTPC emerged as the top gainer on the Nifty50, rising 3.52%, followed by Tata Motors, which saw an impressive 3.29% increase. IndusInd Bank posted a strong performance with a 3.14% rise, while Adani Ports & Special Economic Zone advanced 3.10%. Adani Enterprises rounded out the list of top gainers, climbing 2.95%. These stocks benefitted from broader market optimism, as investors flocked to sectors with promising growth potential in the face of easing inflation.
On the downside, HCL Technologies faced substantial losses, dropping by 8.67%, making it the biggest loser of the day. Other technology stocks, including Tech Mahindra, Wipro, Infosys, and Hindustan Unilever, also experienced declines, reflecting the broader pullback in the technology sector. HCL's steep fall raised concerns about the future prospects of IT companies, which had been riding high for a long period before facing headwinds in the form of rising inflation and slower growth expectations.
Dr. Vijayakumar advised retail investors to focus on large-cap stocks that had been beaten down by the recent market correction. He suggested that quality stocks in sectors such as banking, autos, and metals could provide long-term value for patient investors. By identifying fundamentally strong companies at attractive valuations, retail investors could position themselves for potential gains as the market recovers from the current turbulence.
Most sectoral indices showed a positive trend in the early trading session, with the Nifty Metal index emerging as the top performer, climbing 2.93%. This surge was led by gains in metal stocks, which had benefitted from improved demand and commodity price stability. Nifty Media followed with a rise of 2.11%, fueled by positive sentiment surrounding media companies. The Nifty Auto sector also had a strong performance, gaining 1.75%, with auto stocks continuing to benefit from pent-up demand and favorable economic conditions. Additionally, the Nifty Oil & Gas index advanced 1.37%, reflecting a more stable global oil price outlook.
The financial sector, which had faced significant pressure in recent months, also posted strong gains in the early hours of trade. Nifty Financial Services Ex-Bank saw a rise of 1.56%, Nifty Financial Services gained 1.12%, and Nifty Bank climbed 1.29%, signaling renewed optimism in the sector. The Nifty PSU Bank index stood out with a notable increase of 2.57%, reflecting strong government-backed banking stocks, while Nifty Private Bank rose by 1.09%, indicating continued investor interest in the private banking space.
In the broader market, several other indices showed encouraging signs of growth. The Nifty Midsmall Services sector gained 1.86%, while Nifty Realty posted a 0.91% increase. Healthcare-related indices, including Nifty Midsmall Healthcare (up 0.86%) and Nifty Healthcare Index (up 0.57%), also showed positive movement, as the healthcare sector remains a defensive play in uncertain times. Other indices such as Nifty Midsmall IT & Telecom (up 0.64%) and Nifty Consumer Durables (up 0.60%) experienced mild gains, reflecting a balanced recovery across different sectors.
While the overall sentiment was positive, some areas, particularly the technology and FMCG sectors, faced pressures. The Nifty IT index fell by 1.86%, reflecting ongoing challenges in the tech space as global growth slows. The Nifty FMCG sector also faced a decline of 0.53%, as inflationary pressures continue to weigh on consumer spending in some categories.
In conclusion, the early trading session saw a solid rebound in the market, bolstered by positive inflation data and strong sectoral performances, particularly in banking, metals, and autos. While some sectors such as technology and FMCG showed weakness, the overall market outlook remains cautiously optimistic. Investors are advised to focus on fundamentally strong stocks, especially in large-cap sectors, and adopt a patient approach as the market continues to navigate through inflationary pressures and global uncertainties.
