Short covering lifts Sensex 164 pts despite sluggish global trade; Midcaps shine

Benchmark indices recouped more than half of previous day’s losses on Thursday, led by short covering in index heavyweights despite rangebound trade in global peers.

The 30-share BSE Sensex gained 164.48 points at 29,332.16 and the 50-share NSE Nifty rose 55.85 points to 9,086.30.

The market has been in a range of 200 points after hitting a record high of 9,218.40 last week. Experts expect this rangebound trade to continue, at least till the start of March quarter earnings next month.

The market is waiting for a trigger now and a major trigger could be results, Ajay Srivastava of Dimensions Consulting feels. This will then give the market direction on either side, he says.

Jayant Manglik of Religare Securities says indications are in the favour of consolidation in near future. Traders should keep a close eye on global developments and focus more on the position management now, he advises.

The broader markets outperformed benchmarks but the gap between advances and declines narrowed as the day progressed. The BSE Midcap and Smallcap indices gained 1 percent each while about 1689 shares advanced against 1121 declining shares on the exchange.

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Pharma major Lupin gained 1.6 percent as it has received approval from the US health regulator to market Tobramycin Inhalation Solution, a generic version of Novartis’ inhalation product Tobi, in the American market. The drug is indicated for management of cystic fibrosis patients.

Vedanta was up 1.8 percent after the National Company Law Tribunal has given approval for scheme of arrangement between the company and Cairn India. The stock also reacted to the special dividend announced by Hindustan Zinc, wherein it holds 64.92 percent stake. Cairn India gained 2.8 percent while Hindustan Zinc was up 2.7 percent.

Brokerage houses remained bullish on Vedanta. Morgan Stanley has initiated coverage with outperform call on the stock as it expects a 30 percent free cash flow CAGR in FY17-19.

Other reason for rise in Vedanta stock price was that according to CNBC-TV18’s sources, the company may compete with JSW Steel for acquisition of Bhushan Steel.

Mahindra & Mahindra gained 0.2 percent. While maintaining a buy call with a target price of Rs 1,546, Motilal Oswal says it is the best play among key auto original equipment manufacturers on the rural market recovery, with highest revenue contribution from rural markets (that contributes around 56 percent to revenues). The research house expects rural markets to fully recover from impact of demonetisation from Q1FY18 onwards.

Tata Motors was biggest gainer and contributor to Sensex’ gains, up 2.6 percent followed by Reliance Industries (up 1.16 percent), Infosys (up 1.25 percent), HDFC (up 0.62 percent) and L&T (up 1.06 percent). NTPC and GAIL gained more than 2 percent while ITC, TCS, HUL and Bharti Airtel were moderately under pressure.

Dish TV was up 1.6 percent as Macquarie says the stock remains top pick in the Indian media space. The brokerage house has maintained outperform rating on the stock with a target price of Rs 125 as it expects the company to receive all approvals for Videocon d2h merger by October 2017.

Petronet LNG advanced 1.3 percent. Motilal Oswal has reiterated its buy rating on the stock with a target price of Rs 460 (implying 19 percent upside), citing strong demand due to lower LNG prices and higher imports.

Titan Company was up 1.5 percent. Morgan Stanley has reiterated the stock as its top pick and raised target price following increase in earnings estimates for Q4FY17 that will be next catalyst.
On the global front, Asia closed slightly higher after US equities ended mixed ahead of a key health care vote in Congress seen as a proxy of US President Donald Trump’s mandate. European markets were also flat with a positive bias, at the time of writing this article.