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Stock market today: Continuing their losing streak for a second consecutive session, Indian stock market benchmarks, the Nifty 50 and the Sensex, closed in the red on Monday, July 22, ahead of the Union Budget 2024.

The fall in key indices could be largely attributed to the poor show of select heavyweight stocks such as Reliance Industries, Kotak Mahindra Bank, ITC, and Wipro. However, gains in shares of HDFC Bank, Infosys and Mahindra and Mahindra underpinned the indices.

Nifty 50 closed the day 22 points, or 0.09 percent, lower at 24,509.25, while the Sensex closed the day 103 points, or 0.13 percent, lower at 80,502.08.

Mid and small-cap segments of the market witnessed healthy gains, shrugging off caution ahead of the Budget.

The BSE Midcap index rose 1.27 percent, while the Smallcap index climbed 0.83 percent.

“After a sharp fall in early trades, markets were in a recovery mode and ended with marginal losses on profit-taking in banking, IT and realty stocks. Investors traded with caution as nervousness gripped them ahead of tomorrow’s Budget. However, markets could see volatility during the Budget announcement on Tuesday, and one may see sector-based action”.

Experts expect the Budget to keep its focus on fiscal prudence and boost the manufacturing and infrastructure sectors.

Meanwhile, the Economic Survey 2023-24 highlighted the resilience of the Indian economy and projected continued strong growth in FY25, subject to geopolitical, financial market, and climatic risks.

Thanks to gains in the mid and small-cap pockets of the market, the overall market capitalization of BSE-listed firms rose to nearly ₹448.5 lakh crore from nearly ₹446.3 lakh crore in the previous session.

28 stocks ended in the green in the Nifty 50 index, while 22 stocks ended in the red.

Shares of Grasim (up 2.58 percent), UltraTech Cement (up 2.41 percent), and NTPC (up 2.22 percent) ended as the top gainers in the index. On the flip side, shares of Wipro (down 9.31 percent), Reliance Industries (down 3.42 percent), and Kotak Mahindra Bank (down 3.25 percent) ended as the top losers in the index.

Among the sectoral indices, Nifty Auto (up 1.15 percent), Healthcare (up 1.10 percent), Pharma (up 1.06 percent), and Metal (up 1.02 percent) indices clocked healthy gains.

However, Oil & Gas (down 0.62 percent), Realty (down 0.48 percent), Media (down 0.47 percent), IT (down 0.38 percent) and FMCG (down 0.34 percent) ended with losses.

Shrikant Chouhan, the head of equity research at Kotak Securities, pointed out that the Indian stock market is currently exhibiting non-directional activity around the 24,500/80,400 level following a reversal formation.

“With Budget Day looming, we anticipate heightened volatility. The 24,500/80,400 level serves as critical support for the bulls, while 24,850/81,600 could pose as the primary resistance zone for traders,” said Chouhan.

“A shift in sentiment may occur if the index falls below 24,500/80,000, potentially leading to a drop to 24,150-24,000/79,000-78,600, supported by retracements and the 20-day SMA (simple moving average). Reducing long positions during rallies is recommended as long as the market is trading below 24,850/81,600,” said Chouhan.

“Buying is advisable only at major support levels (24,150/79,000 and 24,000/78,600) with a medium to long-term perspective. If the market surpasses 24,850/81,600, it has the potential to advance towards 25,000/82,000 and 25,300/83,000 levels,” Chouhan said.

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Stock market today: An all-round selloff swept through the Indian stock market on Friday, July 19, leading to losses of approximately 1 percent for the benchmark indices, Nifty 50 and Sensex. The midcap and smallcap segments experienced even steeper declines as investors booked profits across sectors ahead of the Union Budget next week. Weak global cues also contributed to the downturn in the domestic market.

Snapping their winning streak of the last four consecutive sessions, Nifty 50 closed the day with a loss of 270 points, or 1.09 percent, at 24,530.90, while the Sensex ended at 80,604.65, down 739 points, or 0.91 percent.

The BSE Midcap and Smallcap indices cracked over 2 percent each.

The overall market capitalization of the firms listed on the BSE dropped to nearly ₹446.3 lakh crore from nearly ₹454.3 lakh crore in the previous session, making investors poorer by about ₹8 lakh crore in a single session.

During a brief surge during the session, the Sensex and Nifty 50 reached new all-time highs of 81,587.76 and 24,854.80, respectively.

As many as 46 stocks ended in the red in the Nifty 50 index and only four- Infosys (up 1.78 percent), ITC (up 0.62 percent), Asian Paints (up 0.60 percent), and Britannia (up 0.06 percent) closed in the green.

Shares of Tata Steel (down 4.97 percent), JSW Steel (down 4.68 percent), and BPCL (down 3.98 percent) closed as the top losers in the index.

Amol Athawale, the VP of technical research at Kotak Securities, observed a long bearish candle on daily charts and a shooting star candle formation on weekly charts, indicating temporary weakness shortly. However, the market’s medium-term texture is still on the positive side.

“The current market texture is non-directional and volatile; hence, level-based trading would be the ideal strategy for the traders. 24,500/80,400 and 24,350/80,000 would act as a key support zone for the bulls, while 24,850-25,000 /81,600-82,000 could be the key resistance areas for the traders,” said Athawale.

“Below 24,350/80,000, the sentiment could change. Below the same, positional traders may prefer to exit from the trading long positions,” said Athawale.

Why did the market fall today?

 

Experts have identified the following four key factors that may have triggered the selloff in the Indian stock market:

1. Weak global cues

Markets across the globe were in a somber mood on Friday amid growing uncertainty over the outcome of the US presidential race. Weak Chinese macro data and deepening China-US trade tensions also weighed on sentiment.

2. Caution ahead of Union Budget

 

Back home, apart from weak global cues, caution ahead of the Union Budget, which will be presented on Tuesday, also kept investors away from riskier equities. There is hope that the government will announce a pro-growth budget that will keep the focus on fiscal consolidation and economic growth. Still, experts also anticipate some hues of populism.

“This decline signals caution ahead of the Union Budget, as participants chose to book profits,” said Ajit Mishra, SVP – Research, Religare Broking.

“We may see further dips in the Nifty, with the next crucial support at the 24,150 level, corresponding to the 20-day EMA (exponential moving average). Traders are advised to avoid aggressive positions and opt for hedged trades. For now, it is also recommended to focus on index majors rather than midcap and smallcap stocks,” said Mishra.

3. IT outage

Experts said reports of system outages across industries due to an issue with the Microsoft update also influenced sentiment.

“The domestic market closed today with a downturn due to the global sell-off, triggered by operating system issues that caused devices to crash worldwide. The global IT outrage has led to disruptions in various Indian industries. The overvalued market is also experiencing profit-booking ahead of the Budget next week. The recent performance has been bullish in anticipation of pro-industry and populist measures,” said Vinod Nair, Head of Research at Geojit Financial Services.

“Markets plunged in the last hour trade on broad-based profit-taking. IT stocks, which held ground in early trades, too, gave up their gains, while other sectoral and broader indices incurred substantial losses after sentiment turned extremely bearish on weak global cues and reports of online businesses in several countries, including in India, hit by cyber outages,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.

4. Concerns overvaluation

Concerns over rich market valuation are also seen as a factor that triggered a profit booking. Nifty 50 is trading above its two-year average price-to-earnings (PE) ratio.

As per the equity research platform Trendline, Nifty’s current PE is 23.6, which is above its two-year average PE of 21.9.

Its current price-to-book (PB) ratio is 4.2, slightly above its two-year average PB of 4.1.

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Jhaveri Credits and Capital, once considered a penny stock, has emerged as a standout success story, delivering exceptional returns to its investors over both the long term and recent periods, showcasing phenomenal performance.

In the last four years alone, Jhaveri’s stock price has surged dramatically by an astounding 18642 percent, skyrocketing from ₹1.96 in July 2020 to its current value of ₹367.35. This remarkable growth underscores Jhaveri’s consistent value appreciation, solidifying its position as a highly lucrative investment opportunity within the penny stock segment.

Over the past three years as well, the stock has witnessed impressive gains, climbing by 6728 percent from ₹5.38 in July 2021. Recent performances continue to underscore Jhaveri’s stellar track record, with a notable 313 percent increase over the past year. In 2024 year-to-date, the stock has shown resilience with a positive gain of over 31 percent, despite experiencing losses in four out of seven months.

July marked a particularly strong rebound, with the stock surging nearly 8 percent, reversing losses from the previous four months. The stock shed around 4 percent in June, 2.6 percent in May, 23 percent in April, and over 5 percent in March. Earlier in the year, February saw a significant rally of 21 percent, following a massive 47 percent surge in January.

While currently trading over 30 percent below its record high of ₹527.30 achieved on March 2, 2024, Jhaveri Credits and Capital has still soared 305 percent from its 52-week low of ₹90.70 recorded on July 24, 2023. This remarkable performance highlights Jhaveri’s ability to deliver substantial returns and maintain investor confidence amid market fluctuations.

Despite its exceptional performance, it’s essential to highlight that the stock is currently under ESM: Stage 1 and has recently (on July 10) received a show cause notice from market regulator Sebi.

What is ESM?

The Enhanced Surveillance Measure (ESM) is a regulatory framework implemented by the National Stock Exchange (NSE) in India. It aims to enhance monitoring and surveillance of listed companies to ensure investor protection and market integrity.

Under Stage I, the trading of the securities is settled through a trade-for-trade mechanism with a price band of 5 percent, or 2 percent.

About the Firm

Jhaveri Credits and Capital Limited engages in the commodity broking business in India. It provides share broking activities in cash, derivatives, and currency; and other services, such as mutual fund, insurance distribution, and agricultural activities. The company is also involved in financing, investment, and broking advisory business. Jhaveri Credits and Capital was incorporated in 1993 and is based in Vadodara, India.

Earnings

In the March quarter (Q4FY24), Jhaveri reported a standalone net profit of ₹35 lahks, declining massively from ₹93 lahks in the same period last year and ₹105.5 lakh in the previous quarter (December 2023).

Meanwhile, total revenue for the quarter stood at ₹487 lahks, a fall from ₹1,142.7 lahks a year earlier but a multifold 233 percent surge from ₹146 lakh in the December quarter.

For the fiscal year 2023-24, the company achieved a standalone net profit of ₹161 lakh, a substantial jump from ₹78.5 lakh in FY23. Meanwhile, revenue for FY24 soared 124 percent to ₹2,641.7 lakh as compared to ₹1,180.3 lakh in the previous financial year.

Brokerage Views

ICICI Direct, a domestic brokerage, has pointed out several strengths of Jhaveri Credits and Capital. It emphasized that the company has shown robust annual EPS (earnings per share) growth and has consistently increased its revenue for the past three quarters. Moreover, ICICI highlighted the company’s low debt levels as another significant positive factor.

Meanwhile, its weaknesses, as per the brokerage, are:

– Promoter holding decreased by more than -2 percent QoQ.

– Poor cash generated from core business – Declining Cash Flow from Operations for the last 2 years

– Degrowth in Quarterly Revenue and Profit in Recent Results(YoY)

Investing in penny stocks offers the allure of high potential returns at relatively low entry costs, but it’s a terrain fraught with substantial risks. One of the primary challenges is liquidity; penny stocks often suffer from limited trading volumes compared to larger, more established companies. This illiquidity can amplify price swings, making them highly volatile investments. Moreover, penny stocks may operate under less stringent financial reporting standards and regulatory oversight, creating opportunities for market manipulation and fraudulent activities. These factors combine to heighten the inherent risk associated with trading in penny stocks.

To navigate this volatile landscape prudently, investors must conduct thorough research and implement robust risk management strategies. Understanding the company’s fundamentals, assessing its market position, and scrutinizing its financial health are crucial steps. Additionally, maintaining a disciplined approach to investment and setting realistic expectations can help mitigate potential losses. By exercising diligence and caution, investors can better navigate the uncertainties of penny stocks, enhancing their ability to capitalize on opportunities while safeguarding their investments against undue risks.

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Stock Picks: Oil and Natural Gas Corporation (ONGC) share price has zoomed 94% in a year and Oil India Ltd offered multi-bagger returns to the investors, cheering investors and analysts.

Analyst confidence in the earnings growth of these upstream oil and gas producers remains strong as Brent Crude prices, which had dipped below $80 a dollar in the first half of June for a short period, have sustained above $80 a barrel thereafter. This has also boosted investor sentiments.

Brent is likely to sustain above $80 a barrel, analysts feel. The demand-supply dynamics are expected to support the Brent crude prices and that may also be positive for investor sentiment towards Oil India and ONGC share prices.

Brent crude’s price rise closed in on $85 a barrel in the last couple of weeks as the Organization of the Petroleum Exporting Countries (OPEC) and its allies continued with voluntary cuts. The OPEC has not given any indications towards easing the voluntary cuts. Further, the geopolitical uncertainty in the Middle East is also supporting the upside of Brent.

On the demand side, while China remains soft, the International Energy Agency or IEA has maintained its global demand growth forecast, analysts said.

Analysts at JM Financial say that IEA expects global oil supply growth for Calendar Year 2024 to be limited to only 0.8mmbpd (million barrels per day) due to OPEC+ output cuts, implying a deficit of ~0.2mmbpd. They believe the strong pricing power of OPEC+ will continue to support Brent at ~USD 80/bbl, which is the fiscal break-even crude price for Saudi Arabia. JM Financial analysts see this as a sweet spot for ONGC and Oil India. The current stock prices of ONGC and Oil India reflect an assumption that these companies will be making money by selling oil at around $70 a barrel.

Additionally, a strong 4-6% dividend yield and a firm production growth outlook over the next 1-3 years are positives. JM Financial has given Buy ratings for ONGC and Oil India. Oil India is also likely to benefit from Numaligarh Refinery capacity expansions.

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As India gears up for the first full-year Union Budget under the NDA government post the 2024 elections, stakeholders across sectors are eagerly awaiting strategic reforms and budgetary allocations. In a recent research note, Fisdom Research delves into the anticipated measures expected to shape FY25, focusing on critical areas such as infrastructure, defense, rural development, healthcare, taxation, and more. These measures aim to catalyze economic growth, enhance social welfare, and bolster various sectors, aligning with India’s vision for comprehensive development and prosperity.

Increased Capex Spending

Expectations are high for sustained high capital expenditure on infrastructure sectors like roads, power, urban development, and railways, said the brokerage. This strategic allocation aims to stimulate economic growth, create employment opportunities, and foster long-term economic multipliers. The BJP manifesto emphasizes robust infrastructure development, aligning with recent interim budget highlights that underscore fiscal prudence with a maintained fiscal deficit target of 5.1 percent. As per Fisdom, key stocks to monitor include Larsen & Toubro (L&T), KNR Constructions, and PNC Infratech, poised to benefit from increased infrastructure investments.

Higher Railway Spending

The brokerage also expects significant investments to be anticipated in expanding and modernizing railway infrastructure, encompassing new lines, station redevelopment, and the introduction of modern trains. This initiative aligns with BJP’s manifesto commitments to enhance railway connectivity and infrastructure. Stocks such as IRCTC, Container Corporation of India, and Titagarh Wagons are likely to gain traction in response to heightened railway sector allocations, it noted.

Affordable Housing and Urban Development

Fisdom also expects funding allocations for affordable housing and satellite township development near metro cities to bolster urban infrastructure and enhance access to affordable housing. The BJP’s pledge to construct 30 million new homes underscores the focus on urban development, complemented by continued investments in affordable housing projects. Real estate stocks such as DLF Ltd., Godrej Properties, and Oberoi Realty are poised to capitalize on these developments, it added.

Modernization of Armed Forces

Fisdom anticipates an increase in defense budgetary allocations to support the armed forces modernization efforts, emphasizing technology acquisition and indigenization. This strategic move aligns with BJP’s commitment to bolster defense capabilities through advanced technology and modern equipment. Defense manufacturers such as Bharat Electronics Ltd. (BEL), Hindustan Aeronautics Ltd. (HAL), and Bharat Dynamics Ltd. (BDL) are expected to benefit from enhanced defense spending.

Farmer Support and Agri-Infrastructure

Expectations include higher Minimum Support Prices (MSPs) for major crops, strengthened agricultural infrastructure, and support for PM Kisan Samman Nidhi. These measures aim to bolster agricultural productivity and rural incomes, reflecting BJP’s manifesto promises and recent budgetary support. Stocks to watch in this sector include Mahindra & Mahindra Ltd., Escorts Ltd., and UPL Ltd.

Support for Startups and MSMEs

As per the brokerage, anticipated expansions in credit programs like Mudra loans and initiatives such as the Startup India Seed Fund Scheme are expected to bolster the startup ecosystem and MSME growth. The BJP’s focus on supporting entrepreneurship aligns with interim budget measures aimed at providing financial support to startups and MSMEs. Financial services and IT sectors, represented by stocks like HDFC Bank Ltd., Kotak Mahindra Bank Ltd., Tata Consultancy Services (TCS), and Infosys Ltd., are likely to benefit from these initiatives.

Job Creation through Public Welfare Schemes

The upcoming Union Budget is poised to emphasize infrastructure projects and public welfare schemes as key avenues for generating employment, particularly in rural areas, it noted. With a focus on job creation highlighted in the BJP manifesto and reinforced in the interim budget, sectors like construction, IT, and services are expected to benefit significantly. Investors eyeing this development should keep an eye on stocks such as Larsen & Toubro (L&T), Tata Consultancy Services (TCS), and Infosys, which are positioned to capitalize on increased government spending in these sectors, stated the brokerage.

Healthcare Initiatives

The brokerage expects continued expansion of the Ayushman Bharat scheme and enhanced focus on healthcare services for women and senior citizens in the upcoming fiscal year. The BJP’s commitment to expanding the Ayushman Bharat scheme aligns with interim budget provisions that aim to increase public health expenditure to 2.5% of GDP. This strategic focus is expected to boost sectors such as healthcare providers and pharmaceuticals, with stocks like Apollo Hospitals Enterprise, Fortis Healthcare, Sun Pharmaceutical Industries, and Cipla poised to benefit from heightened government support and expenditure, it predicted.

Renewable Energy Investments

According to Fisdom, anticipated increases in investments in renewable energy sources, including solar and wind power projects, are set to drive clean energy technologies forward. The BJP’s focus on renewable energy investments, supported by interim budget allocations, underscores the government’s commitment to sustainability. Sectors such as renewable energy are poised to thrive, with stocks like Tata Power Ltd., Adani Green Energy Ltd., and NTPC Ltd. offering potential growth opportunities for investors interested in green initiatives.

Green Initiatives

Support for green hydrogen projects and sustainability-focused infrastructure, including incentives for battery energy storage systems, is expected to feature prominently in the upcoming fiscal agenda. Highlighted in the BJP manifesto and complemented by interim budget incentives, these initiatives aim to promote environmental sustainability and innovation. Investors interested in sustainability projects may consider stocks such as Inox Wind Ltd. and Suzlon Energy Ltd., which are positioned to benefit from increased government support and market demand for green technologies, forecasted the brokerage.

Personal Income Tax

Expectations for revisions in income tax slabs to provide relief to the middle class are high, with potential increases in basic exemption limits and adjustments to tax thresholds anticipated, it said. The BJP manifesto’s emphasis on enhancing disposable income for the middle class aligns with the interim budget and hints at tax structure rationalization to support economic activities. Sectors benefiting from increased consumer spending, including consumer goods and retail, may see potential growth opportunities for stocks such as Hindustan Unilever, Nestle India, Marico, Avenue Supermart, and Titan Company, noted Fisdom.

Corporate Tax

Anticipations include potential reductions in corporate tax rates for MSMEs to bolster growth and sustainability. Emphasized in the BJP manifesto, these measures aim to support MSMEs and startups as pivotal drivers of economic growth and employment. Investors monitoring this sector may consider stocks such as HDFC Bank, Kotak Bank, and Axis Bank, which are well-positioned to capitalize on a competitive tax environment aimed at attracting investments and boosting industrial growth, it predicted.

As India prepares for the FY25 Union Budget, expectations are set on transformative measures across key sectors to drive economic resilience and social welfare. The anticipated reforms underscore the government’s commitment to infrastructure development, defense modernization, rural upliftment, healthcare enhancement, and progressive taxation policies. These initiatives are pivotal in navigating India towards sustained economic growth, fostering sectoral resilience, and unlocking opportunities for both investors and stakeholders across diverse industries.

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