IT, TECK stocks drive rally in Indian markets on Tuesday

A heavy buying in IT and TECK stocks helped Indian equity markets to garner strong gains on Tuesday, with both Sensex and Nifty ending over half a percent higher. After a positive start, markets witnessed some volatility during early morning deals, amid mixed global cues and hawkish comments from Federal Reserve officials. Some cautiousness came with a private report stating that hiring activity saw a 5 per cent decline in January, while sequentially it was up 3 per cent. The sequential increase was largely due to an improvement in demand for skilled talent in the tourism, telecom, and Banking, Financial Services and Insurance (BFSI) industries. Traders took note of S&P Global Ratings’ statement that India’s sovereign rating support may strengthen over time if the next government - post general elections - could fund large infra projects without widening the country’s current account deficit and can shrink the fiscal deficit significantly.  

In late morning deals, key indices gained traction and maintained their gaining rally till the end of the trading session, as foreign fund inflows aided domestic sentiments. Foreign institutional investors (FIIs) net bought shares worth Rs 518.88 crore on February 5, provisional data from the NSE showed. Traders got encouragement after the Organization for Economic Co-operation and Development (OECD) raised India’s growth outlook for 2024-25 (FY25) to 6.2 per cent from the 6.1 per cent estimated earlier in its November outlook. Some support also came in, as according to data from the Central Depository Service and National Securities Depository, the number of demat accounts opened in January totalled over 46.84 lakh, compared to 40.94 lakh a month ago and 21.90 lakh a year ago. The total demat tally crossed 14.39 crore, up 3.4 percent from a month ago and 30.3 percent from a year ago. 

On the global front, European markets were trading mostly in green, as Germany's factory orders unexpectedly rebounded in December. The figures from Destatis showed that factory orders registered a monthly expansion of 8.9 percent after remaining unchanged in November. Orders were forecast to fall 0.1 percent. Domestic orders surged 9.4 percent and foreign orders grew 8.5 percent. Asian markets ended mostly higher on Tuesday, even after the average of household spending in Japan was down 2.5 percent on year in December, coming in at 329,518 yen. That missed expectations for a drop of 2.0 percent following the 2.9 percent decline in November. On a monthly basis, household spending sank 0.9 percent - again missing forecasts for an increase of 0.2 percent following the 1.0 percent decline in the previous month. 

Back home, the banking industry stocks remained in focus as credit rating agency S&P Global Ratings said strong credit growth of Indian banks could moderate to 12-14 per cent in the next fiscal if deposit growth remains tepid. It added rising cost of funds and potential rate cuts in fiscal 2025 will squeeze net interest margins. Meanwhile, urging banks to work in close coordination with Department of Commerce and export promotion councils for trade facilitation and early resolution of problems faced in trade, Secretary of Department of Financial Services, Vivek Joshi has advised banks to classify issues faced by them in different categories and indicated that they may consider seeking necessary regulatory guidance from RBI and also develop a standard operating procedure through Indian Banks Association (IBA).

Finally, the BSE Sensex jumped 454.67 points or 0.63% to 72,186.09 and the CNX Nifty was up by 157.70 points or 0.72% to 21,929.40.

The BSE Sensex touched high and low of 72,261.40 and 71,625.18, respectively. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.06%, while Small cap index was up by 1.23%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 3.02%, IT up by 2.94%, TECK up by 2.74%, Telecom up by 2.17% and Energy up by 2.07%, while Power down by 0.39%, Bankex down by 0.36%, Utilities down by 0.27% and FMCG down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech. up by 4.43%, Maruti Suzuki up by 4.06%, TCS up by 4.05%, Wipro up by 3.59% and Infosys up by 2.52%. On the flip side, Power Grid down by 2.97%, Indusind Bank down by 1.84%, ITC down by 1.52%, Kotak Mahindra Bank down by 1.21% and Axis Bank down by 1.14% were the top losers.

Meanwhile, S&P Global Ratings has said strong credit growth of Indian banks could moderate to 12-14 per cent in the next fiscal (FY25) if deposit growth remains tepid. It said banks may be compelled to look for wholesale funding. It added that higher costs of such funding could further strain margins and hurt profitability. 

It stated rising cost of funds and potential rate cuts in fiscal 2025 will squeeze net interest margins. It expects the share of unsecured personal loans in the banks' total loan book to continue to rise. This will also help banks to partly mitigate the downside risks to margins from tighter liquidity.

Besides, it said the Reserve Bank of India's recent ruling on applying higher risk weights to unsecured personal loans has not yet hindered rapid growth in this segment. Stable asset quality and steady capitalisation support the banks' credit profiles.

The CNX Nifty traded in a range of 21,951.40 and 21,737.55. There were 35 stocks advancing against 15 stocks declining on the index.

European markets were trading mostly in green; UK’s FTSE 100 increased 33.04 points or 0.43% to 7,645.90 and France’s CAC rose 9.75 points or 0.13% to 7,599.71, while Germany’s DAX lost 12.73 points or 0.08% to 16,891.33. 

Asian markets ended mostly higher on Tuesday, with Chinese and Hong Kong markets surging after a government investment fund said it would expand purchases of stock index funds to counter heavy selling in the Chinese markets and a report said China’s leader Xi Jinping was set to discuss the nation's stock market with financial regulators. However, some gains were limited by concerns over heightened geopolitical tensions in the Middle East. Seoul markets fell after comments from US Fed Chair Jerome Powell and other Fed officials suggested that interest rate cuts may come later than anticipated. Japanese markets declined as investors booked profits and continued to assess domestic earnings reports. Meanwhile, Taiwan's stock market is closed from today to 14th February for the Lunar New Year holiday.