Closing Bell: Market Ends Higher Following US Fed Rate Cut; Sensex & Nifty Rise; Midcaps & Smallcaps Lag

Indian equity markets ended on a positive note on September 19, 2024, with the benchmark indices-Sensex and Nifty-posting record highs in an otherwise volatile trading session. The Sensex closed 237 points higher at 83,185, while the Nifty gained 38 points, finishing at 25,416. These gains came despite midcap and smallcap stocks facing heavy selling pressure, with both indices closing in the red.

During the trading session, the Nifty 50 index briefly crossed 25,600, and the Sensex touched 83,700 for the first time in history. However, market volatility trimmed some of these early gains by the end of the day. The broader markets experienced a more pronounced downturn, with the Nifty Midcap 100 index losing 401 points, or 1.5%, closing at 59,352. Similarly, the Nifty Smallcap 100 index fell by 344 points, or 1.8%, to 19,045.

Volatility in the broader market was heightened by the US Federal Reserve's recent decision to implement a 50 basis points rate cut-the first such move in over four years. This development initially provided a boost to investor sentiment, but soon gave way to concerns about global economic uncertainty, resulting in significant selling pressure in midcap and smallcap stocks.

The Nifty Midcap index's fall of over 900 points at one point during the day saw 87 of its 100 stocks trading in the red. Some of the major losers in this space included Vodafone Idea, Indus Towers, Torrent Power, and Bharat Dynamics.

Vodafone Idea, in particular, saw its biggest single-day fall since January 2022, declining 19%, after the Supreme Court rejected the telecom companies' plea for recalculating their adjusted gross revenue (AGR) dues. This decision also heavily impacted Indus Towers, which recorded its largest single-day loss since June 4, dropping 10%.

The Nifty Smallcap 100 index's 1.8% decline mirrored the negative sentiment in the broader market. Investors showed concern over rising uncertainties, driven by both domestic and global factors.

The India VIX, which gauges market volatility, dropped by over 6% to 12.5, reflecting some relief in market anxiety after the Fed's rate cut. However, this did not prevent heavy selling in public sector undertakings (PSUs). The Nifty PSE index, which tracks the performance of state-owned companies, fell nearly 2%. Major losers included BPCL, which declined more than 3%, as Brent crude prices approached $75 per barrel.

While the midcap and smallcap segments struggled, the banking and IT sectors helped lift the broader market. The Nifty Bank index ended the day 287 points higher, closing above the 53,000 mark at 53,037.6. HDFC Bank and Kotak Mahindra Bank were the top contributors to the banking index's gains.

On the technology front, shares of LTIMindtree and Info Edge (Naukri) saw strong performances, with Info Edge rising over 2% after a "buy" rating upgrade by Bank of America. The broader tech sector benefited from positive global cues, as the Fed's rate cut supported risk-on sentiment in growth stocks, including IT and software.

Amid the market volatility, more than 240 stocks managed to hit fresh 52-week highs. ICICI Bank, Bharti Airtel, NTPC, Britannia Industries, Cholamandalam Investment and Finance, and Shriram Finance were among those reaching new peaks. NTPC, in particular, was the top gainer on the Nifty 50, up more than 2%, following the filing of an IPO for its subsidiary, NTPC Green.

On the other hand, Radico Khaitan and United Spirits saw their stocks end lower after the Andhra Pradesh government approved a new liquor policy. The policy decision was perceived as unfavourable for liquor companies operating in the region, leading to selling pressure. GE T&D hit the 5% lower circuit after reports surfaced about the promoter's plans to sell a stake in the company.

Looking ahead, market participants will closely watch global developments, particularly further actions from the US Federal Reserve, as well as domestic data points like corporate earnings and inflation trends. While the broader indices like Sensex and Nifty remain near record highs, the underperformance of midcap and smallcap stocks signals a cautious stance by investors, especially in a volatile and uncertain global environment.