Sensex, Nifty open in the green; Tech stocks among the top gainers

• Sensex opened 340 points higher than the last close, while Nifty was up 73 points.
• The US markets have closed lower as markets await inflation data to be released on Tuesday.
• Experts have been advising caution for investors.

Indian benchmark indices opened in the green on Tuesday after a sharp drop on Monday. Sensex opened 340 points ahead, while Nifty was up 73 points as of 9:45 am.

Tech stocks were among the top gainers with TCS gaining 2.3%, TechM was up by 0.9% and Infosys by 0.7%. The other top gainers on Nifty were Apollo Hospitals and HDFC Bank. ITC, Hindalco, Cipla, NTPC and JSW Steel were the top losers on Nifty in early morning trade.

Nifty Bank opened in the green, while Nifty Midcap and small-cap indices were trading in the red.

The markets broke a two-session rally on Monday as Sensex fell 616 points to close at 73,502, while Nifty fell by 160 points to 22,332, on weak global cues. The weak global cues continue as the US markets have closed lower as markets await inflation data to be released on Tuesday.

While Dow Jones closed with a marginal gain of 0.12%, tech-heavy Nasdaq closed 0.4% lower as top tech stocks closed in the red. Top tech stocks like Facebook parent Meta dropped over 4%, with even Nvidia closing 2% lower.

‘Caution amid excessive optimism’

The markets have been waxing and waning for the last few weeks, with regular spurts of profit booking.

“Investors are treading cautiously, particularly as the last bear of Dalal Street signals caution amid excessive optimism. With key inflation reports from the US and India poised to influence market sentiment, all eyes are on the consumer price inflation (CPI) and Producer Price Index (PPI) data for directional cues,” said Prashanth Tapse, senior VP of research at Mehta Equities.

Experts have been advising caution for investors with many sectoral indices being overheated. At an industry conference on Monday, SEBI chief Madhabi Puri Buch flagged off a possible bubble in the mid and small cap space.

The small cap index is 7.8% down from its peak, and experts expect more correction.

“The dominant near-term trend in the market now is the correction in the broader market, particularly the small caps. The regulator SEBI has sent a clear message about the frothy valuations in the small cap segment and, therefore, regulatory actions are likely, going forward. There can be redemptions from small cap funds adding to the downside,” said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.

Experts also add that there has been a noticeable absence of sustained buying at higher levels, although minor downturns have been met with buying interest. “We maintain our strategy of buying during declines and liquidating long positions at higher levels,” said Sameet Chavan, head of research, technical and derivative at Angel One.

They also add that the market breadth has also been under pressure, with only a handful of stocks presenting outperforming opportunities.

“Highlighted investment opportunities include Indigo, Apollo Hospitals, and Colgate Palmolive, with Apollo Hospitals standing out as a momentum play, recommended for buying at the current market price with specific targets in mind, reflecting a cautiously optimistic outlook in the face of inflation uncertainties,” added Tapse.