Due to the threat and grim economic outlook, the indices opened in the red before recovering. However, upsides were still limited. Volatility remains high and analysts have advised caution.
“Periods of sustained market buoyancy like this can be used to churn portfolios. Most portfolios will have some poor quality stocks. Such stocks can be sold, even at a loss, in favour of quality stocks in performing sectors, even if they are slightly expensive. A clear trend in the market is the outperformance of quality IT stocks. The market is discounting the improving prospects of the IT sector,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Factors driving markets
- Trump threatens not to sign stimulus: In a video posted on Twitter, Trump said the stimulus bill – the result of months of wrangling in Congress – was “a disgrace” with too much foreign spending, adding he wanted to increase the “ridiculously low” $600 checks for individuals to $2000.
- World moves to isolate Britain: A new coronavirus strain in the UK has caused several countries around the world to shut their borders with Britain. Drugmakers are left scrambling to test their COVID-19 vaccines against the new strain.
- Virus spread at peak: Weekly COVID-19 infections rose by the highest since the pandemic began, with the United States reporting the most number of cases for any single country, the World Health Organization said on Tuesday.
- Grim macro data: Data on Tuesday showed US consumer confidence dropped to a four-month low in December, while US existing home sales also fell in November. The US economy grew at a record pace in the third quarter, the Commerce Department said, revising up its estimate for gross domestic product.
- Another stimulus next year: US President-elect Joe Biden said his administration would put forward another COVID-19 relief package next year, including a new round of stimulus payments.
How are bluechips doing
After opening in the red, benchmark indices rose above the flatline. At 9.53 am, BSE flagship Sensex was up 216.07 points or 0.47 per cent to 46,223. NSE benchmark Nifty followed and climbed 51.60 points or 0.38 per cent to 13,517.90.
“13,100-13,150 is a good support for the Nifty and we are trading well above that this morning. Until that level is not threatened we continue to remain in bullish territory. If that level breaks, we could slide down to 12,800. On the upside, we need to get past the hurdles of 13,700-13,800 to start forming an opinion to go long again. Hence, a wait and watch approach would be a prudent way to deal with the current markets,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.
In the 50-share pack Nifty, Wipro was the biggest gainer, up 2.57 per cent. Cipla, Infosys, Maruti Suzuki, Bajaj Finance, HCL Tech, Tata Motors, IndusInd Bank, Grasim Industries and TCS were among other gainers.
ONGC was the top loser in the pack, down 1.16 per cent. HDFC Life Insurance, Divi’s Labs, SBI Life Insurance, Hindalco, Axis Bank and ICICI Bank were other losers.
Broader market indices also traded with gains outperforming their headline peers in morning trade. Nifty Smallcap gained 1.22 per cent while Nifty Midcap rose 0.62per cent. Broadest index on NSE, Nifty 500 was up 0.27 per cent.
Godrej Properties, Mphasis, Escorts, Wockhardt Pharma, Firstsource Solution and Indiabulls Real Estate were among major gainers from the space while Avanti Feeds, Omaxe, Equitas Holdings, Trent, Ipca Labs and Zee Entertainment were under selling pressure.
Asian stocks steadied, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.1 per cent after three days of declines. Japan’s Nikkei rose 0.1 per cent, although gains were concentrated in healthcare and technology stocks.
S&P 500 futures were down half a percent by mid-morning in Asia and European and British equity futures fell by the same margin as the news offset hints of progress toward a British trade deal with Europe.