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The Indian stock market experienced a positive surge on Tuesday, extending its gains for a second consecutive session. The Nifty and Sensex indices both saw significant increases, driven primarily by a strong performance in the oil and gas, and auto sectors. While trading volumes remained relatively subdued, reflecting the festive season, the Tata Group captured significant attention. The announcement of a planned Rs 15,000 crore IPO (Initial Public Offering) for Tata Capital, the conglomerate's flagship financial services arm, sent ripples throughout the market. This news resulted in a substantial increase in the value of several Tata Group stocks, including Tata Motors and Tata Investment, which saw gains as high as 12 percent. This surge highlights the investor confidence in the Tata Group's expansion strategy and the anticipated success of the upcoming IPO.
At midday, the Sensex closed at 78,752.62, up 212.45 points (0.27 percent), while the Nifty reached 23,820.65, a 67.20-point (0.28 percent) increase. Market breadth was positive, with approximately 2000 shares advancing and only 1366 declining. The Nifty Auto index led the sectoral gains, fueled by the strong performance of major players such as Tata Motors, Mahindra & Mahindra (M&M), and Maruti Suzuki. The Nifty Oil and Gas, Infrastructure, and Energy indices also recorded notable gains, each rising by almost one percent during the morning session. Conversely, the Metal and Bank indices experienced profit-booking, falling by up to 0.8 percent, following a one-percent rally in the previous session. This suggests a degree of market consolidation, with investors taking profits after recent gains. The India VIX, a measure of market volatility, continued its downward trend, indicating a decrease in perceived risk.
However, despite the positive market sentiment, experts caution against assuming a sustained rally. V K Vijaykumar, Chief Investment Strategist at Geojit Financial Services, pointed to both external and internal factors that could restrain significant market growth. Externally, the strong US dollar and high bond yields in the US are expected to prompt Foreign Institutional Investors (FIIs) to sell on rallies, potentially limiting upward momentum. Internally, concerns about slowing economic growth and earnings are seen as near-term negatives. The high valuations of many companies, coupled with the current challenging macroeconomic conditions, are unlikely to support significant Price-to-Earnings (PE) expansion, according to Vijaykumar. This suggests that while the market may experience short-term gains, sustained growth may be difficult to achieve in the near future.
The broader market, encompassing mid-cap and small-cap stocks, also exhibited positive momentum, with gains of 0.3 and 0.5 percent, respectively. This outperformance of larger-cap stocks in recent months is attributed to robust participation from retail investors. This trend is noteworthy as small and mid-cap stocks typically demonstrate high-beta behavior during market declines. However, this contrasts with their performance this period, illustrating a unique shift in investment patterns. The continued upward trend in City Gas Distribution (CGD) stocks, with companies like Indraprastha Gas Ltd, Mahanagar Gas Ltd, and Gujarat Gas Ltd experiencing increases of up to 4 percent, reflects investor optimism fueled by recent policy changes. The central government's decision to reduce Administered Price Mechanism (APM) gas allocation to CGD players, while potentially controversial, has surprisingly increased investor activity in this sector.
Another significant market event was the surge in Greaves Cotton shares, exceeding 11 percent on December 24th. This substantial increase stems from the filing of a draft red herring prospectus by Greaves Electric Mobility Limited (GEML), its subsidiary, for an upcoming IPO. The high trading volume, surpassing the one-month daily average, demonstrates strong investor interest in the company's electric mobility plans and its entrance into the public market. The exceptional performance of Tata stocks, notably Tata Investment, Tata Chemicals, and Tata Motors, following the report of a potential Rs 15,000 crore IPO for Tata Capital, further solidified the positive market sentiment. The market anticipates significant value unlocking through this IPO. However, despite the optimism, technical analysts like Sameet Chavan, Head of Technical and Derivative Research at Angel One, highlighted crucial resistance levels that could impact the market's continued upward trajectory. He indicated that until certain price levels are surpassed, the current bounce should be viewed as an opportunity to reduce long positions. Conversely, support levels have been identified that could mitigate potential downward corrections.
In conclusion, while the Indian stock market exhibited significant gains driven by strong performance in specific sectors and positive news regarding upcoming IPOs, particularly those of Tata Group companies, analysts advise caution. A combination of internal and external factors might curb sustained growth in the near future. Nevertheless, the current positive market sentiment, fuelled by strong retail investor participation and expectations related to various IPOs, has created a dynamic market landscape.
Source: Santa rally? Sensex, Nifty extend gains for second session as auto, oil and gas stocks rise