Nifty, Sensex end flat amid volatility; positive momentum may resume: Analysts

Nifty January futures crossed the 22,000 mark and hit a high of 22,025 intraday. The broader markets outperformed with BSE Smallcap and BSE Midcap indices trading higher at 0.95 percent and 0.83 percent, respectively

Indian equity markets ended the new year's 1st reading session with marginal gains amid high volatility. At close, the Sensex was up 31.68 points or 0.04 percent at 72,271.94, and the Nifty was up 10.50 points or 0.05 percent at 21,741.90.

The broader markets outperformed with main indices BSE Midcap and Smallcap added 0.5 percent each.

Sectorally, except Nifty Auto and Nifty Bank, all other sectoral indices were ended in the green. Nifty PSU Bank index led the gains, rising half a percent followed by Nifty Metal, Nifty IT, Nifty FMCG and Nifty Energy. Nifty Infra,  and Nifty Pharma also traded with gains of up to half a percent.

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"Market exhibited strength led by optimism on rate cuts, easing global inflation, and softer bond yields. But profit booking was visible at higher levels as lingering concerns over Red Sea disruptions pose short-term risks to global supply chains and freight costs," said Vinod Nair, Head of Research at Geojit Financial Services.

"The spotlight of this week is also on FOMC minutes which will provide an insight for 2024 rate cut. Momentum in mid & small caps remains strong, buoyed by a positive macro-outlook however private banks experienced a reversal trend." he added.

The year gone by saw Nifty rallying around 20 percent and analysts see markets to be moving higher this year also. According to Motilal Oswal, CY24 will likely bring some moderation in issues like multi-year high-interest rates, concerns about banking crises in the US and Europe, and geopolitical uncertainties.

"With global liquidity tightening nearing its end, a healthy domestic macro and micro environment, strong domestic and retail participation, and expected political continuity post-2024 general elections bode well for policy momentum in India," according to brokerage Motilal Oswal.

Further, the country is currently experiencing the highest growth among major economies. Hence, despite fair valuations, the above factors augur well with the potential for further upside, it said.

"We anticipate continued optimism in the market and maintain a positive outlook and overweight stance on sectors such as BFSI, Industrials, Real Estate, Auto and Consumer Discretionary," the brokerage added.

Analysts at Kotak Institutional Equities believe that the returns in 2024 will depend on the tussle between fundamentals and sentiment. In an entirely ‘fundamental’ market, returns will likely be modest for the market and negative for many stocks. In a less-than-fundamental market, market returns can vary,  they said.

Any market correction will be entirely based on a big change in the market’s expectations of potential returns." We have no idea though as to what will change the market’s bullish return expectations, which have been reinforced by the stellar returns of the past three years for ‘new’ retail investors," the Kotak analysts said.

Also Read: Strong macros, rate hopes, retail surge to keep up market rally, predicts Motilal Oswal

Fundamental factors such as earnings downgrades and higher-than-expected interest rates may lead to correction. "Increased focus on fundamentals versus flows may result in a correction," said Kotak analysts.

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