Stock Market: US debt ceiling suspense pauses rally; smart hands lay on mid & smallcaps

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By S Jha

New Delhi, May 23: Dow Jones broke down the 33,000 levels in early hours of trade on Wednesday morning, as the traders began worrying hard that the debt ceiling negotiations may test their patience. The US politics is sharply polarized, and both the Democrats and the Republican Party are bracing up for the next year’s Presidential election.

US Secretary of Treasury Jante Yellen has also cautioned that the country may need to print currencies to avert default. The deadline for the debt ceiling decision is June 1, and the traders are expecting a last minute decision, which may involve concessions on the part of Joe Biden administration, which doesn’t want to cut down on its populist measures in the election year.

Nifty sought to shrug off the global negative cues to recoup the deep cut in the morning to turn positive with a gain of over 40 points during the day. But all was lost soon after, and the 50-share index went into the red. During the see-saw battle of the bulls and bears, the bullish sentiments appear to be not giving up their positions, while the bearish bets sought to ride the retracements to make a quick gain before the weekly and the monthly expiry of the option contracts.

Bank Nifty has been under pressure amid the sharp uptick in the bond yield in the US market, and the index remained most bearish during the session. Bank Nifty in fact had been most bullish of the indices, and it had just scaled the level of 44000 to dive down on account of the global negative cues.

But the smart hands are seen to be lapping the scrips available at attractive prices. Dixon Technology on the back of strong quarterly numbers gained almost seven per cent on Wednesday, closing at Rs 3503. The contract manufacturing company is off its high, while still commanding a PE valuation of 88, which is seen to be fairly valued.

Metro Brands, an IPO of the recent times, has zoomed to its all-time high, riding on the consumer appetite for shoes, with the scrip closing at Rs 928 on Wednesday, while it had listed at Rs 520. It is also commanding a PE valuation of almost 70, which again is seen to be fairly valued by the market participants.

Deepak Nitrate, a market leader in the fertilizer sector, is also being seen to be lapped by the investors for value buying, as the scrip gained almost 10 per cent on Wednesday. Laurus Labs, one of the badly thrashed scrip, is also being seen to be attracting value buying as the scrip is gaining steadily for the past few days, and it gained another six per cent on Wednesday.