Sensex and Nifty open flat as profit booking cancels out IT gains
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Summary: The world's largest economy's inflation appears to be easing, as seen by the US producer prices for July rising less than anticipated. This caused the IT index to rise by 0.6%.
After lower US producer pricing data that suggested a slowdown in inflation, benchmark indices began broadly steady on Wednesday. This was due to significant profit booking, which offset gains in the information technology sector.
As of 9:29 am, the S&P BSE Sensex was up 0.06 percent at 79,013.2, while the NSE Nifty 50 index increased slightly by 0.01 percent to 24,143.55.
The OI build-up suggests that today's weekly expiry for Nifty will likely be at 24,200 and for BankNifty at about 50,000. The maximum pain for Nifty is trading at 24,300, and for BankNifty at the 50,200 level. Rahul Ghose, CEO of Hedged.in, stated as much.
"Broader Indices may trade in a zig-zag manner, and two-way movements shall be witnessed with a mild downward bias; however, we advise building a long position at today's low for next week's expiry," Ghose said.
Investors are now eagerly expecting the US consumer price index (CPI) data for July, which is set to be issued after Indian market hours, as it may provide additional insight into inflation trends.
In the meantime, 0.2% fell from financial equities and 0.1% from private banks, with ICICI Bank, a private lender, losing 1.1%. Due to worries about growing deposit costs, analysts pointed out that the financials are still under pressure. Given the high valuations in the Indian markets, they anticipate more profit bookings.
According to Aditya Suresh and Suresh Ganapathy of Macquarie Capital Securities, "India offers superior quality in terms of return on equity compared to other emerging markets, but this factor alone cannot justify the current valuation premium."
In other industries, Hero MotoCorp, a maker of motorcycles, dropped 1.6% as its June quarter profit forecast was below expectations due to low average prices. The reduction was more severe for non-bank lender Piramal Enterprises (PIRA.NS), which fell 6% after disclosing a decline in net earnings for the same time frame.
Eight of the thirteen key sectors saw gains despite these decreases. However, the larger and more nationally oriented small-cap and mid-cap indices saw a 0.2% decline each.
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