IT Shares Carry the Nifty for a Second Day as $106 Brent Keeps a Lid on the Rally

A day after the Nifty jumped 1.6%, Indian benchmarks spent Wednesday morning going nowhere, and the reason sat almost entirely in two sectors pulling in opposite directions. Technology shares kept climbing for a second session, while state-run banks and drugmakers gave ground, leaving the headline indices stuck close to where they ended on Tuesday.

The tug of war under a flat index

By 11 AM, the Sensex was up about 55 points at 73,088.75 and the Nifty 50 was only 4 points higher at 22,726.05. Those numbers hide a wide spread underneath. Nifty IT was the best-performing sector, up more than 1.5% in early trade, with TCS, Infosys, HCLTech and Tech Mahindra rising between 1% and 3%. At the other end, the Nifty Pharma and Nifty PSU Bank indices were each down more than 0.8%.

Tuesday's rebound, which lifted the Nifty to 22,721.95 and the Sensex to 73,033.78, was also led by IT. That makes Wednesday a test of whether the sector's buying has staying power, or whether it was a one-day bounce after weeks of selling.

Crude is the cap

The reason the IT buying has not lifted the wider market is oil. Brent crude was quoted around $106.85 a barrel, keeping pressure on India's import bill, the rupee and inflation expectations. Retail inflation has already touched a 23-month high, and costlier fuel feeds into the interest rate outlook that banks and rate-sensitive stocks depend on. Steady selling by foreign investors added to the caution.

IT companies are among the few large-cap groups that tend to gain when the rupee weakens, since most of their revenue is earned in dollars. That helps explain why money is moving into the sector even as crude weighs on most others.

Bank of Baroda drags PSU lenders

The PSU bank index had a stock-specific weight of its own. Bank of Baroda fell about 3% and traded near its 52-week low after NMC Healthcare founder BR Shetty reportedly filed a $15 billion damages suit against it in the Bombay High Court. The lender said in an exchange filing that it has not been served and will defend the case.

Results-driven moves elsewhere

Away from the indices, quarterly numbers drove sharp swings. Transformers and Rectifiers rose nearly 16% after its September-quarter profit more than quadrupled. Tata Elxsi gained close to 8% on improved earnings, and SS Retail climbed almost 14% after a 60% rise in quarterly profit. Anand Rathi Share and Stock Brokers went the other way, falling nearly 6% as its operating margin narrowed despite higher profit. Cyient DLM touched a 52-week high of Rs 1,049.

Broader markets were soft, with the Nifty Midcap down about 0.27% and the Nifty Smallcap down about 0.16% by late morning.

Levels traders are watching

Analysts see the 22,850 mark as the level the Nifty needs to clear on a closing basis to confirm a trend reversal. On the downside, HDFC Securities has flagged support at 22,580, followed by 22,300, and suggested buying on dips. Results from BHEL, Canara Bank, CEAT and Tata Technologies, due later on Wednesday, could set the tone for individual stocks in the second half of the session.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.