Indian Equities Stage Smashing Comeback; Sensex Rebounds 1,534 Pts

Indian equities staged a smashing comeback in Friday's trading session after a sharp slump of nearly 1400 points on Thursday. The Sensex posted its second biggest gain of the year and surged nearly 3 per cent. The surge in Friday's session came as a surprise for investors as they tracked an overnight fall on Wall Street. Asian stocks shrugged the fall on Wall Street as bargain-hunting purchases offset some risk-off sentiment among investors. 

Also, earlier in the day, China's central bank announced cutting of five-year loan prime rate (LPR) to 4.45 per cent from 4.6 per cent. LPR is the rate at which many landers base their mortgage rates. China's move helped ease some pressure owed to the Russia-Ukraine conflict, prospects of bigger interest rate hikes to contain surging inflation and supply-chain issues that have been worsened by China's zero-COVID policy. 

The 30 share Sensex surged 1534 points or 2.91 per cent to settle at 54,326. Its broader peer Nifty50 gained 457 points or 2.98 per cent to end at 16,266.

"After witnessing a sharp decline over the past two weeks, the equity markets ended this week on a positive note. However, following global cues, the India equity markets large volatility. Benchmark indices like Sensex 30 and Nifty50 saw gains between 2-3 per cent. The overall market breadth was positive with gains witnessed across mid-cap, small-cap and most sectoral key indices," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

"The metal sector rebounded sharply post steep correction in recent weeks. The BSE IT index was down in an otherwise positive market this week. FII’s continued with their selling in India. Markets remained wary of global growth-inflation expectations. With result-season coming towards the last leg, the focus will be more on the macro data points. Monetary policy tightening action by Central Banks globally amid high inflation will continue to weigh on market sentiments," added Chouhan.

On the Sensex, Dr Reddys Laboratories (DRRD) stood out as the star of the day as it surged 8.10 per cent and closed at Rs 4,246 apiece on NSE. On Wednesday, the company posted a net profit of Rs 88 crore, down 76 per cent on a year-on-year basis as it booked one-time impairment expenses of Rs 742 crore in the last quarter. However, it reported a 15 per cent year-on-year rise in revenues from operations to Rs 5,437 crore. 

"Currently the base business’s topline and bottom-line is growing in double-digits. India will remain a key focus market for DRRD over the longer run. US business did witness sharp pricing pressure which was offset by new product launches, volume growth in base business and favourable forex rates. DRRD is confident of double-digit core growth in Russia in FY23. It is not facing any issue either in shipping products or receiving payments and believes there is a good opportunity in Russia. Despite strong local demand and management optimism, we believe outlook in Russia and Ukraine (12 per cent of FY2022 sales) remains uncertain and hence we have not factored in any incremental earnings upside from market share gains in Russia," said Purvi Shah, DVP (Fundamental Research) – Pharma Analyst, Kotak Securities.

With a market capitalisation of more than Rs 70,000 crore, the shares stand higher than 5-day, 20-day and 50-day moving averages but lower than 100-day and 200-day moving averages. 

"Superior performance across key markets supported by new launches and market share gain in existing products, Russia showing strong growth despite Russia/Ukraine war coupled with no write offs/set back is seen as respite. DRRD’s core margin outlook remains healthy given continued traction in branded markets. Thus, we have an ADD rating on the stock with target price of Rs 4520," added Shah.

Other top gainers percentage wise include Reliance Industries which surged 5.77 per cent, Nestle India (4.74 per cent), Tata Steel (4.22 per cent), Larsen & Toubro (4.01 per cent) and Axis Bank (3.55 per cent). Reliance Industries posted the biggest one-day gain since September 2020. None of the stocks ended in red at close on the Sensex.

"Led by Reliance Industries and Tata Motors, bulls came back with vengeance primarily buoyed by a fall in the U.S Treasury bond yields and the US Dollar Index. Another positive takeaway was that all round buying was witnessed from FMCG and IT to Metal stocks," said Prashanth Tapse, Vice President (Research), Mehta Equities.

Metal stocks, which slid over 4 per cent in the previous session, rebounded to close 4.2 per cent higher. The sub-index snapped five weekly losses and gained 7.4 per cent for the week.

One 97 Communications, parent of digital payments firm Paytm, ended up 3.9 per cent ahead of its March quarter results due later in the day. 

"On weekly charts, the Nifty has reclaimed 16000 and is comfortably trading above the 10-day SMA. The reversal formation is likely to continue if the index succeeds to trade above 16000 and above the same it could move up to 16400. Further upside may continue, which could lift the index up to 16550. However, below 16000, upside would be vulnerable and the index could hit the level of 15800-15700," said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities.