Stock Market: US, Asia decouple; twins’ show steal show on Dalal Street

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By S Jha

New Delhi, May 4: On a weekly option expiry day, traders keep hawk’s eyes on HDFC twins. If HDFC and HDFC Bank climb and sustain the gains, the indices get steams to run the full course. There are other twins as well, but HDFC siblings are special. On Thursday, Bajaj twins – Bajaj Finance and Bajaj Financial Services – too came to the party.

The foreign institutional investors are bringing over Rs 1000 crores to the cash market on a daily basis. That gives a definitive direction to the market. On Thursday, the FIIs once more poured over Rs 1300 crores and their domestic counterparts also raised their stakes to give a secular rally to the bourses.

When the heavyweights fire, as had been the case with the Thursday weekly expiry of option contracts, the indices go soaring, trapping shorters who have to go covering their short positions. This explained that sharp gain of Nifty, which climbed by over 175 points during the fag end of the session. Bank Nifty also complimented the broader markets.

The trending move was one directional, as except for minor pullbacks the indices kept gaining strength. Now Nifty is above 18200 level, which may give psychological strength to the traders.

The big US Federal Reserve event is also now behind the market, and scope for surprises is minimal. By and large the US Fed will pause the rate hike button. The US economy is already at the doorsteps of recession with just 1.1 per cent quarterly GDP growth. This augurs well for India and Asian markets, because the Central banks will no longer be under the pressure to hike the rates in their bid to defend their national currencies.

With the prospects of the rate hikes now becoming real, the rate sensitives – the banking and the realty sectors – are likely to gain the attention of the market participants. The banking stocks, including private and public, have been trend setters in the last 18 months. The realty sector is the most beaten down pack, with most of the scrips losing heavily and the scale is only matched by the IT sector.

Europe and the US indices were trading with sharp cuts amid the deepening of the financial institution crisis as regional banks in America reel under the stress of high interest rates. There could be early signs of decoupling of the Asian markets from their peers in the developed world.