Benchmarks Sensex and Nifty are expected to open flat on Wednesday amid mixed global conditions. However, analysts say the broader market (mid caps and small caps) will continue to outperform despite stretched valuations.
The Gift Nifty price was at 19,665, while Nifty September futures closed at 19,653, suggesting that US stocks opened flat despite closing lower overnight. Asia-Pacific markets were mixed, with gains in Japan and Singapore, while losses in Australia and other markets.
However, Nifty Midcap broke the 40,000 mark for the first time in history, while Nifty SmallCap hit a new high.
Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd, said: Looking ahead, markets will continue to trade within a broader range with a positive bias as a resilient domestic economy provides strength amidst uncertain global cues.
On the economic front, macro data remained strong, analysts said.
India’s service sector activity slowed in August, but new order growth remained high, as service firms reported the sharpest upturn in new export business, said Deepak Jasani, head of retail research at HDFC Securities, which became a monthly report for businesses on Tuesday. Surveys show that their workforces and output are expanding. While the seasonally adjusted S&P Global India services PMI business activity index fell to 60.1 in August from 62.3 in July, it still showed one of the strongest gains in output since mid-2010. The headline figure has been above the neutral 50 threshold for 25 consecutive months. The S&P Global India Composite PMI Output Index, which measures combined output from services and manufacturing, fell to 60.9 in August from 61.9 in July.
FIIs are still selling in the cash space, said Chola Securities. FII has covered its short position in stock index futures. FII’s total long position was 7,381 contracts. The long-short ratio is 52%, indicating that there are more long contracts.
On September 5, 82 new long contracts of stock index futures were added, and 1,696 short contracts were liquidated. Net calls indicate that there are more call writers on the index options side. “All in all, sentiment is bullish on the index. The index has closed decisively above 19,500, with good market breadth.”