Technology Takes The Lead

Despite weak economic data and the ongoing Hindenburg effect, indices managed to post gains thanks to a threesession rally powered by strength in information technology stocks 

The performance of the Indian headline indices has improved compared to last fortnight as the Hindenburg effect was lessened due to the remedial actions taken by Adani Group against the research agency. It was also due to the RBI requesting information from banks regarding their exposure to Adani Group firms and the declaration that the exposure was not very significant and that a single case could not impact the system. As per data issued by the Ministry of Statistics and Programme Implementation, India’s industrial growth reduced to 4.3 per cent in December 2022 from 7.3 per cent in November, as measured by the Index of Industrial Production (IIP). 

In January 2023, wholesale price index (WPI)-based inflation fell to a 24-month low of 4.73 per cent. In contrast, India’s headline retail inflation rate surged to a three-month high of 6.52 per cent in January from a one-year low of 5.72 per cent in December. The decline in foreign currency assets (FCAs), a significant portion of the overall reserves, caused India’s foreign exchange reserves to fall for the first time in almost three weeks. The indices experienced a three-session rally in the second week of the fortnight despite lacklustre economic data.

This led the BSE Sensex and Nifty 50 to post 0.82 and 1.01 per cent gains for the fortnight, respectively. The rally was mostly fuelled by robust gains in technology stocks, which led to a surge in the sectoral index BSE Information Technology of more than 3 per cent in just three trading sessions. Despite a decline in net profit for the December quarter, shares of Tech Mahindra soared about 12 per cent in just two sessions, making it the top Sensex gainer for consecutive sessions. 

Nucleus Software Exports, Zensar Technologies and Sonata Software were among the top IT gainers from the smallcap pack. BSE Power continued to be the worst performing sector, losing more than 5 per cent in the last two weeks, dragged down by Adani Goup stocks such as Adani Green Energy and Adani Transmission, which were locked in back-to-back lower circuits. The BSE Auto, BSE Fast Moving Consumer Goods (FMCG) and BSE Realty sectors all experienced selling pressure and fell more than 1 per cent. 

Broader indices, which had been severely impacted in the last fortnight, performed better, with the BSE Mid-Cap and BSE Small-Cap indices rising 0.22 and 0.16 per cent, respectively. In the case of India, FII flows reversed as the country remained the most exciting market for equities. Interestingly, both domestic institutional investors (DIIs) and foreign institutional investors (FIIs) became net buyers. In the last 15 days, the FII inflow was recorded at Rs 804.22 crore, while DII inflow was recorded at Rs 5,022.58 crore.