Bulls hold ground as D-Street stays cautious; defence stocks fire up

On Thursday, the markets concluded the day in a neutral position, with major indices displaying a small upward movement despite underlying shifts. The Nifty 50 ended at 24,636, up by 11.35 points or 0.05 percent from its previous close. In contrast, the Sensex closed at 78,954.76, also up by 0.48 percent. This resulted in a gap of approximately 43 basis points between the two benchmarks, a discrepancy that has been persisting for four consecutive sessions since the NSE introduced its Closing Auction Session (CAS) on August 3.

Market analysts attribute this divergence to differences in institutional order flow and auction-window liquidity rather than fundamental disagreements. Most experts anticipate the gap to narrow as participants adjust their strategies. Ajit Mishra, SVP-Research at Religare Broking, commented that the Nifty is likely to test the 24,800–25,000 zone after consolidating in a narrow range over the past three sessions.

Thursday also marked the weekly Sensex expiry day, which brought caution to the trading session, although the NSE cash market turnover was 3 percent higher than the previous day. Reliance, SBI, and BEL emerged as the top gainers in the Nifty pack, while Powergrid, Tata Steel, and TCS dragged the index down. The main focus of the trading session was on the defence stocks, which saw a surge of nearly 3 percent, driven by Hindustan Aeronautics and Bharat Electronics.

The surge was spurred by ongoing global geopolitical tensions and sector rotation towards the defence sector. PSU Bank stocks also attracted significant investor interest, with the Nifty PSU Bank index rising by 2.2 percent, partly due to a positive first-half FY27 earnings report. Other sectors, such as Realty, Auto, and Media, underperformed, while Metal stocks closed in the red.

The broader market exhibited a mixed sentiment, with the Nifty Midcap 100 declining by 0.44 percent, while the Nifty Smallcap 100 advanced by 0.48 percent, continuing to trade near its all-time high. The BSE advance-decline ratio stood at 0.98, indicating mild profit-taking in the mid and small-cap space. The Indian rupee was among the weaker performers in the Asian currency basket, falling 10 paise to close at 95.21-95.22 against the US dollar.

This decline was attributed to increased importer demand for dollars and a firming Dollar Index nearing 99.50. Gold prices surged, with MCX Gold climbing roughly ₹1,400 to near ₹1,49,900 per 10 grams, mirroring gains in COMEX Gold, which increased by about $28 to around $4,275 per ounce due to a weaker dollar and optimism surrounding US-Iran nuclear talks.

Brent crude oil remained below $80 a barrel, supported by indications of an agreement between Iran and Oman on Strait of Hormuz shipping arrangements, alleviating one of the most pressing near-term energy supply concerns. On the policy front, the Reserve Bank of India proposed a uniform, principle-based interest rate framework for banks and non-banking financial companies (NBFCs) to enhance transparency and monetary policy transmission.

While this move could help level the playing field for lenders, it may gradually reduce NBFCs' pricing flexibility. Looking ahead, the next session’s trading range for the Nifty is projected to be between 24,400–24,800. Investors will be closely monitoring Friday’s US Non-Farm Payrolls data, which is expected to influence near-term dollar direction, thereby impacting the rupee and foreign flows.

On the earnings front, results from State Bank of India (SBI), Titan, Hindalco, Hitachi Energy, and Godrej Consumer Products are scheduled for release. With crude oil prices stable, earnings are expected to remain robust, and the RBI’s growth outlook remains supportive. Consequently, the broader market sentiment remains sideways to bullish, although a decisive move above the 24,800–25,000 range may be necessary to trigger the market’s next significant upward move.