The Nifty Midcap and Smallcap indices gained more than 6%, Nifty Bank and Auto indices rose 10%, followed by Metal (up 12%) ), but IT and Pharma closed in the red
The September series will definitely be remembered in the future as several fiscal measures taken by the government to revive the economy and earnings lifted market sentiment significantly.
In fact, the series which about to end with a loss due to a fractured economy and subdued sentiment has not only recouped losses but also added more gains in just the last few trading sessions.
The market volatility and correction till September 19 were clearly an indication that measures 1.0, 2.0 and 3.0 announced by Finance Minister Nirmala Sitharaman for sectors like auto, NBFCs, exports, realty and PSB merger are not enough to revive demand and sentiment.
The Nifty50 was down 2.2 percent to 10,704 levels from the start of series till September 19 and in fact all sectoral indices were also in the red, but midcaps and smallcaps were telling a different story as the Nifty Midcap and Smallcap indices outperformed frontliners, falling 0.5 percent and rising 0.94 percent respectively in same period.
The bold and surprising move by the government to cut the corporate tax rate to 25 percent, down from 35 percent (inclusive of surcharge and cess), and a 17 percent special tax rate for new companies, effective from October 1, proved to be a real trigger, and it helped the market take complete ‘U-turn’ on September 20 and 23.
The Nifty50 gained more than 8 percent in just two trading sessions, its biggest ever two-day rally. Many stocks jumped quite sharply on tax saving benefits and earnings upgrade. The renewed buying interest and improved sentiment since September 20 helped the index gain 5.7 percent in September series.
The impact of the government’s move was quite strong as many stocks hit 52-week and all-time highs, and more than 3/4th of F&O stocks showed positive return in September series.
The top 56 stocks among F&O segment rallied more than 10 percent and of which top 25 stocks gained 15-36 percent in the series gone by.
The list included Bharat Petroleum Corporation, Siemens, Container Corporation of India, Page Industries, PVR, Vedanta, Bajaj Finserv, Bajaj Finance, Colgate-Palmolive (India), Amara Raja Batteries, RBL Bank, Adani Power etc among others.
The rally in PSU stocks like BPCL (35.5 percent) and Container Corporation (24 percent) was because of reports of its likely privatisation surfaced and many experts said it could be one of next moves from the government in coming days.
Also in the above list, we excluded IDBI Bank (up 36.52 percent) and Kajaria Ceramics (up 21.38 percent), which will not be traded in F&O segment with effect from September 27, the first day of October series.
Apart from above two stocks, Arvind, Birlasoft, Engineers India, Hindustan Zinc, IDBI Bank, MCX India, Oracle Financial and Raymond will also be stopped from trading in F&O segment from October series.
The Nifty Midcap and Smallcap indices gained more than 6 percent, while Nifty Bank and Auto indices gained 10 percent each, followed by FMCG (up 8 percent), Metal (up 12 percent), but IT and Pharma closed in the red.
After the rally in September, the positive movement is expected to continue in the October series as well and indices could hit fresh record highs by Diwali which would be towards end of series, experts said.
“We have seen lower rollover in both the indices in October series as Nifty rolled nearly 65 percent against 69 percent in previous series and Bank Nifty around 55 percent versus 66 percent which indicates mildly bullish bias,” Ajit Mishra, Vice President Research, Religare Broking told Moneycontrol.
Considering the data, he advised continuing with the ‘buy on dips’ approach till the Nifty holds above 11,350.
On the higher side, the 11,700-11,800 zone would act as a hurdle, he said, adding traders should continue with a stock-specific trading approach and preferring index majors and quality midcap for trades.Majority of analysts, in a Moneycontrol poll conducted earlier this week, said the Nifty could celebrate Diwali by surpassing its earlier record high of 12,103 in October.