MUMBAI: Indian benchmark indices opened lower on Wednesday but soon recovered to trade in positive territory, supported by hopes of relief on Long-Term Capital Gains (LTCG) tax, Securities Transaction Tax (STT) and a decline in institutional selling. However, weak global cues continued to weigh on market sentiment.
At the opening bell, the BSE Sensex fell 116.42 points, or 0.16 per cent, to 72,917.36, while the NSE Nifty 50 declined 30.85 points, or 0.14 per cent, to 22,691.10. GIFT Nifty was also trading lower at 22,709.50, down 141 points, or 0.62 per cent.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the sharp rally in the Nifty on Tuesday came as a surprise amid the broader market downtrend and was largely driven by short-covering. “The 358 point sharp rally in the Nifty yesterday, in an otherwise weak down trending market, came as a bit of a surprise,” Vijayakumar said, adding that traders with short positions may have rushed to cover them following the sudden recovery.
He said comments by Union Finance Minister Nirmala Sitharaman at the Bloomberg New Economy Forum had also supported market sentiment. The Finance Minister indicated that the government would review stakeholder feedback on LTCG tax and the Securities Transaction Tax (STT), raising expectations of possible changes in the tax structure.
Vijayakumar added that the rupee’s appreciation had helped ease selling pressure from foreign institutional investors (FIIs). The Reserve Bank of India’s measures to curb speculation in the currency market led to a 1.5 per cent appreciation in the rupee over the previous two trading sessions, he said.
However, he cautioned that high US bond yields and elevated crude oil prices remained major challenges for the market. The US 10-year bond yield was hovering around 5.2 per cent, while Brent crude was trading near USD 106 per barrel. He said the rally could struggle to sustain amid these headwinds, although sectors such as financials, telecom, metals and automobiles could remain resilient on expectations of strong second-quarter results.
In commodity markets, crude oil rose 0.64 per cent to USD 94.75, while Brent crude gained 0.53 per cent to USD 106.25. Gold edged up 0.05 per cent to USD 4,163.71. US market futures showed a mixed trend. Dow Jones futures rose 0.16 per cent to 51,751.48, while S&P 500 futures slipped 0.02 per cent to 7,805.45. Nasdaq futures declined 0.15 per cent to 27,204.38.
From a technical perspective, Shrikant Chouhan, Head of Equity Research at Kotak Neo, said the market had found support near the 22,300 level for the Nifty and 71,700 for the Sensex before rebounding sharply. He said the formation of a long bullish candle on the daily chart and a reversal pattern on the intraday chart were positive signals.
Chouhan identified 22,480 for the Nifty and 72,500 for the Sensex as key support levels. As long as the indices remain above these levels, the market could maintain its positive momentum, he said.
On the upside, 22,850 for the Nifty and 73,500 for the Sensex are immediate resistance levels. A sustained move above these levels could take the indices towards 23,000 and 74,000, respectively. However, a fall below the key support levels could weaken the bullish trend, prompting traders to reconsider their long positions, he added. (ANI)
