Sensex trades flat, Nifty near 24,000 ahead of US Fed meet; IT pack shines

Benchmark indices Sensex and Nifty traded largely flat on Tuesday, while IT stocks advanced, led by Infosys, even as investors weighed a sharp sell-off in technology stocks across Asian and U.S. markets against a steep decline in oil prices amid growing optimism over a possible U.S.-Iran deal. Attention now turns to the U.S. Federal Reserve meeting, which begins later today.

The 30-share Sensex traded above at 76,800, while the 50-share Nifty traded near the 24,000 level. On the Sensex, BEL, Power Grid Corp NTPC, SBI, HDFC Bank, and Bharti Airtel were the major laggards, falling up 3.5%. On the flipside, Tech Mahindra, Infosys, HCL Tech, and Eternal gained up to 3%.

Broader markets were mixed in early trade, with the Nifty Midcap 100 rising 0.2%, while the Smallcap 100 slipped after a sharp rally in the previous session.


Expert views
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said several positive factors could help sustain the market's mild rally, although he expects the gains to be uneven, with occasional profit booking and corrections.

He identified the sharp correction in Brent crude to $87 as a key fundamental and sentiment positive for the market. He also pointed to the healthy progress of the monsoon in July, which has brought the monsoon rainfall deficit down to 15.4%.

Vijayakumar said the Q1 results announced so far indicate an earnings revival, which could continue in the coming quarters. He also highlighted strong credit growth in the economy, running at around 18%, along with healthy volume growth in sectors such as automobiles.

On the external front, he said the weakening of the global chip trade was a positive for India.

Global markets
In Asia, Kospi grabbed the headlines, tanking over 8% afterrising competition from China and a steep fall in SK Hynix's US-listed shares weighing heavily on investor sentiment. The broader MSCI Asia Pacific Index fell 2.92%, with technology stocks bearing the brunt of the losses. The Kospi dropped 7.89%, while Japan's Nikkei declined 3.86%% and the Topix fell 2.77%.

US stock futures also edged lower in early Asian trading on Tuesday as investors braced for a busy week of megacap earnings and awaited the Federal Reserve's rate decision. S&P 500 futures fell 0.3%, while Nasdaq 100 futures declined 0.2%. Dow futures gained 24 points, or 0.05%.

The moves came after a mixed session on Wall Street. The 30-stock Dow climbed more than 260 points, or around 0.5%, while the S&P 500 posted a modest gain as oil prices retreated following a pause in fighting in the Middle East.

The Nasdaq Composite, however, slipped 0.2% as a sell-off in semiconductor stocks weighed on the tech-heavy index.

Crude impact
Oil prices slipped 1% on Tuesday as traders assessed the possibility of a diplomatic breakthrough between the US and Iran after Washington paused its strikes. The development has raised hopes that the conflict could ease and that energy flows across the Middle East may eventually return to normal.

Brent crude futures were down $0.78, or 1%, at $88 a barrel, while US West Texas Intermediate crude fell $0.88, or 1.1%, to $82. Both benchmarks had dropped 1% earlier in the session, touching their lowest levels in more than a week.
US President Donald Trump said on Monday that the US was engaged in "good talks" with Iran and that a resolution was possible. He also warned that US strikes would resume if negotiations broke down. Iran has issued similar warnings about retaliation.

FII/DII Tracker
Foreign Institutional Investors (FIIs) sold equities worth a little over Rs 822 crore on July 27, while Domestic Institutional Investors (DIIs) were net buyers to the tune of Rs 2,329 crore, provisional data from the NSE showed.

Rupee vs dollar
The Indian rupee opened 0.16% higher at 95.76 against the US dollar, compared with its previous close of 95.91.

Technical view
According to Chouhan, the pullback rally is likely to continue as long as the Nifty sustains above 23,800, with the corresponding Sensex level at 76,300. On the upside, the index could retest its 20-day Simple Moving Average (SMA), placed around 24,100-24,150, while the corresponding Sensex range is 77,000-77,300.

On the downside, Chouhan said a decisive break below 23,800, or 76,300 for the Sensex, could trigger renewed selling pressure. In such a scenario, the Nifty may decline towards 23,700-23,600, while the Sensex could fall to 76,000-75,500.

On strategy, Chouhan advised investors to use the ongoing pullback to reduce weak long positions in the 24,100-24,200 zone. Fresh buying, he said, should be considered selectively on declines towards the 23,800-23,700 support area, where the risk-reward profile appears more favourable.

(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)