Indian Stock Rally Stalls as Profit Taking Tempers Record Highs
Indian stock markets ended a volatile session flat on Monday, giving up early gains as investors booked profits after a record-breaking run. The NSE Nifty 50 (NSEI) and the BSE Sensex (BSESN) closed little changed at 24,836.1 and 81,355.84 points, respectively, despite reaching all-time highs earlier in the day.
Profit-Taking Hits Tech and Consumer Goods
The market witnessed a cautious mood as investors cashed in on recent gains, particularly in information technology (IT) and consumer goods stocks. These sectors, which had been major drivers of the recent rally, saw their indexes fall 0.4% and 0.3% respectively.
“Market participants are getting jittery with the Nifty nearing 25,000 points,” said Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management. “Valuations are high after a strong session on Friday, prompting some profit booking.”
Despite the pullback, analysts remain optimistic about the overall market sentiment. “The strength in mid-cap stocks is a positive sign,” Dadheech added. India’s small-cap (NIFSMCP100) and mid-cap (NIFMDCP100) indexes outperformed their larger counterparts, rising around 1% each. The mid-cap index even reached a record closing high.
The recent surge in Indian equities has been fueled by a combination of factors, including:
- Foreign inflows: Foreign investors have been pouring money into Indian stocks, attracted by the country’s strong economic growth prospects.
- Tax reforms: Despite the Indian government raising taxes on equity capital gains and derivatives trading last week, the overall impact on the market has been muted.
- Positive corporate earnings: Strong earnings reports from some key companies have boosted investor confidence.
Sectoral Performance
- IT and Consumer Goods: These sectors, which had been leading the rally, saw profit booking as investors judged their valuations to be stretched. The Nifty IT index (NIFTYIT) dropped 0.4% after gaining 2.3% on Friday, while the consumer goods index (NIFTYFMCG) fell 0.3% following a 1% rise in the previous session.
- Construction and Consumer Durables: However, there were bright spots outside the usual suspects. Construction major Larsen & Toubro (LART.NS) surged 2.6% after securing multiple large orders, making it one of the top gainers on the Nifty 50. Similarly, home appliances maker Whirlpool of India (WHIR.NS) jumped 4.6% after reporting a strong first-quarter profit increase.
The near-term outlook for Indian stocks remains uncertain. Investors are likely to remain cautious in the lead-up to the crucial US Federal Reserve interest rate decision later this week. A dovish stance from the Fed could provide further support to the Indian market, while a hawkish turn could trigger another round of profit booking.
