Taking Stock: Nifty, Sensex fall amid heightened volatility on expiry day

Benchmark indices the Sensex and the Nifty erased the previous day’s as banks and IT stocks again came under pressure, with FII selling and fading hopes of US rate cuts weighed on the sentiment.

At close, the Sensex was down 359.64 points or 0.51 percent at 70,700.67, and the Nifty was down 101.40 points or 0.47 percent at 21,352.60. About 1,813 shares advanced, 1,423 declined and 55 were unchanged.

In the broader market, the midcap indices corrected but the Nifty smallcap closed 0.5 percent higher from the previous day.

All sectoral indices, barring Nifty Realty, ended in the red. The financial services, pharma, bank, IT, FMCG and healthcare index settled over a percent lower.

The market will remain close on January 26 on account of Republic Day.

Analysts blamed FII selling, WTI oil spike and diminishing prospects of US rate cuts for the losses.

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Was the correction expected?

“Market correction was the need of the hour on account of inflated valuations in most of the mid and small cap stocks with no fundamental and technical backing. The correction can be expected for a few more sessions leading to the vote on account-Budget 2024,” said Trivesh D, COO, Tradejini.

Data suggests that market tends to be bearish leading up to the budget and February has had an average fall of around 1.4 percent over the last 10 years. This trend is expected to continue.

FII selling dragging the markets

The sideways consolidation is expected to continue in the next few sessions, said analysts as selling by foreign institutional investors (FIIs) during the week weighed on sentiment.

Foreign institutional investors (FIIs) maintained selling pressure in the cash segment for six days in a row, offloading shares worth Rs 6,934.93 crore over the past six sessions. They have net sold shares worth Rs 19,300 crore, so far, this month.

“This is partly in response to the rising bond yields in the US where the 10-year yield has risen to 4.16 percent and partly due to the high valuation in the Indian stock market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Also Read | Nifty, Sensex fall 1%; FII selling, firm US yields among factors weighing on sentiment

India Inc’s Q3 results were below Street expectations. Most banks, led by sector heavyweight HDFC Bank, reported disappointing sets of numbers.

The volatility should be used by investors to rejig their portfolios, Vijayakumar said. Banking pockets were fairly valued and performance and prospects look good. “There is value in bluechips like HDFC Bank,” he said.

Technical View

The support for the Nifty is at 21,100, while resistance at 21,400. A fall below the psychological level of 21,000 will weaken the overall trend and investors can anticipate further slide, said Vaishali Parekh, vice-president of technical research at Prabhudas Lilladher.

Volatility is expected to remain high due to the scheduled expiry of January month derivatives contracts and the prevailing earnings season.

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