Sensex, Nifty give up day's gains on profit booking, may see more volatility as valuation concerns loom

The star performer emerged to be Nifty Realty index on January 9 as it gained over 2 percent led by gains in Brigade Enterprises

Domestic markets cooled off from day's high to end on a flat note on January 9 amid strong global cues. Benchmark indices S&P BSE Sensex and NSE Nifty 50 indices shut shop marginally in green at 71,386 and 21,544 on Tuesday. While realty and auto supported market breadth, banks and media stocks succumbed to selling pressure. Going forward, analysts believe that the markets may witness bouts of volatility but the inherent strength remains intact.

"The markets gave up almost all gains amid increased profit-booking by investors towards the end of session. This was as a result of realisation that markets cannot hold such high valuations. We believe Nifty could fall 500 points more if it breaches below 21,500," said Vinit Boljinkar, Head of Research at Ventura Securities.

Aashish Somaiyaa, CEO of WhiteOak Capital AMC, told Moneycontrol that the first half of 2024 will be much more favourable for overall markets compared to the second half. "The market momentum is expected to remain robust in the run-up to elections. Once the big event is out of the day, we may see lacklustre trade," he said.

However, buying interest was seen in the broader end of the market as Nifty Midcap 100 and Nifty Smallcap 100 indices gained up to 0.4 percen, while the fear gauge India VIX slipped 1 percent to 13 levels.

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Analysts at ICICI Securities believe that the Nifty may undergo consolidation in the 21,800-21,300 range as we enter the Q3 earnings season. This, therefore, would make the overall market healthy and pave way for next leg of rally, they said.

The star performer emerged to be the Nifty Realty index as it gained over 2 percent, led by gains in Brigade Enterprises after it signed a Rs 3,400-crore contract with the Tamil Nadu government. Overall, analysts at Jefferies in a recent note shared that they expect low inventories and mid-cycle affordability to support residential sales growth in 2024.

Nifty IT, too, gained positively in trade as climbed 0.4 percent. This comes ahead of Q3 results that will start from January 11. Apart from that, the Nifty Auto index gained nearly a percent after Bajaj Auto announced a Rs 4,000-crore share buyback plan.

Also read: Analyst Call Tracker | Why Tata Motors dazzled in 2023 but Eicher dimmed out?

The Bank Nifty, on the other hand, slipped 0.4 percent to 47,242 levels on January 9. The index that carries 36 percent weightage in the Nifty has approached near the key support of the past two week's low, said analysts at ICICI Securities.

Going ahead, they believe that holding the same would keep the pullback option open, which would eventually provide the impetus for revival of upward momentum in the Nifty. "Hence, buying on dips would be the prudent strategy to adopt as strong support is placed at 21,300 for the Nifty," ICICI Securities said.