Nifty holds above 25,100 on expiry, Sensex slips 350 points as IT drags; Citi downgrades India

Broader markets held up better in trade on July 17.

Dalal Street fell to selling pressure in the last hour of trade on Thursday, July 17, as investors sold-off their holdings. The Nifty 50 gave up the 25,200 mark on the weekly expiry, while the Sensex slipped over 350 points.

At close, the Sensex was down 375.24 points or 0.45 percent at 82,259.24, and the Nifty was down 100.60 points or 0.40 percent at 25,111.45. About 1952 shares advanced, 1931 shares declined, and 142 shares unchanged.

The Nifty Realty index led the gains with a rise of 1.3 percent, followed by Nifty Metal and Nifty Pharma, which advanced 0.7 percent and 0.4 percent respectively. Nifty Energy and Nifty FMCG also posted modest gains of 0.3 percent each.

On the downside, Nifty IT was the worst performer, falling 1.4 percent. Nifty PSU Bank slipped 0.7 percent, while Nifty Infra and Nifty Media were down 0.3 percent and 0.2 percent respectively.  IT shares sank the most amid muted earnings for the first quarter of the current fiscal year, leaving experts concerned about ongoing demand pressure.

The broader markets outperformed the benchmarks, only slipping mildly into the red. The Nifty Smallcap 100 and Nifty Midcap 100 were lower by 0.1 percent each.

"Indian equity benchmarks ended marginally lower as investors exercised caution amid subdued Q1 earnings announcements, particularly in the technology and banking sectors. Market participants remained sidelined due to elevated valuations of large-cap stocks and FII outflows owing to the uncertainty regarding US-India trade deal; however, any positive developments could amplify market sentiment," said Vinod Nair, Head of Research, Geojit Investments Limited.

Citigroup Inc.'s brokerage arm downgraded its rating on Indian equities to 'neutral' from its earlier 'overweight' stance on Thursday, July 17. On the other hand, China and South Korea's markets have been upgraded to 'overweight' on an improved earnings outlook and reasonable valuations.

According to Citi, India's macro story looks better than peers and a U.S. trade deal remains possible, but the market’s EPS growth outlook no longer looks exceptional against the backdrop of still

relatively high valuations.

Further, India has slipped to fourth place among the most preferred investment destinations in the Asia-Pacific region, as the Nifty continues to struggle in a prolonged two-month consolidation phase. This marks a shift in fund manager sentiment, according to Bank of America's latest survey.

"We believe 25,100/82,300 will remain a key support zone for traders. As long as the market remains above this level, the bullish trend is likely to persist. On the upside, the market could bounce back to the 20-day SMA or 25,350/83,200. Further upside could even take the market to 25,500/83,800," said Shrikant Chouhan, Head Equity Research, Kotak Securities.

He added that below 25,100/82,300, the trend may change. If the market moves below this level, it may fall towards the 50-day SMA or the 25,000-24,900/82,000-81,700 zone.