Profit booking, high valuations subdue markets; pharma, IT stocks fall

Profit booking, high valuations subdue markets; pharma, IT stocks fall

Mumbai, October 22, 2020

Profit booking along with high valuations subdued the Indian equity markets on Thursday, breaking their four-day winning streak.

Globally, Asian stocks opened lower following Wall Street as investors were spooked regarding the status of the new US stimulus.

Similarly, European stocks fell as fears spread about next month's US presidential election and data showing that German consumers had become less willing to spend.

Back home, volumes on the NSE were just above the recent average while advance decline ratio was positive.

Among sectors, media, metals, and realty indices rose, while pharma, IT and bank indices fell.

The Nifty50 on the National Stock Exchange closed at 11,896.45, lower by 41.20 points, or 0.35 per cent, from its previous close.

The Sensex closed at 40,558.49, lower by 148.82 points, or 0.37 per cent, from its previous close of 40,707.31.

"Nifty once again recovered from the lows but ended in the negative," said Deepak Jasani, Head of Retail Research at HDFC Securities.

"Recovery from the low suggests that some more upmove is in the offing though the rise may not be smooth."

According to Vinod Nair, Head Of Research at Geojit Financial Services: "Profit booking is seen in major sectors like banking, pharma & IT post the recent rally. Till now, Q2 result is positive but a lot is factored in the market."

"The stocks could feel the pressure in the near term given high valuations, however, optimism can continue as earnings trajectory stays in-line with estimate. Western markets are dull too as US fiscal stimulus talks are getting delayed further and focus is drifting to the US election outcome."

Rahul Sharma, Market Strategist & Research Head, Equity99 Advisors, noted that market sentiments were hurt by weakness in the global stock markets after US President Donald Trump on Wednesday accused Democrats of being unwilling to craft an acceptable compromise on stimulus, following reports of progress earlier in the day.

"However, broader market remained active. Ahead of corporate earnings, stock-specific action continued in selective counters with sectoral rotations. Till the outcome of the US elections markets are expected to remain volatile," he said.


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