Sensex, Nifty snaps 5-day winning streak on profit-booking but no 'trend reversal' yet

Market observers continue to believe that the trend reversal has not begun yet and timely correction would make overall markets healthy for further rally

Equity benchmark the 30-pack Sensex and the broad-based Nifty fell in the morning trade on January 16, snapping a five-day winning streak, as investors booked profits across counters after a record run.

Equity strategists, however, say a trend reversal has not begun yet and that a timely correction will make the market healthy for a further rally.

At 9.26 am, the Sensex and Nifty were down 0.2 percent each at 73,200 and 22,051. HCL Tech, Wipro, and Tech Mahindra were the biggest losers in the Sensex pack, as Tata Motors, Bajaj Twins and JSW Steel bucked the trend.

Next stop 22,300?

Analysts expect the Nifty, which closed on a new high the previous day, to march on. The index could reach 22,300 in the coming sessions, as the earnings season progresses into the second week, Mandar Bhojane, Research Analyst at Choice Broking said.

"On the upside, the Nifty's resistance levels are identified at 22,300 and 22,500, with an immediate support at 21,800 level," he said.

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The Nifty is now up three times from the Covid low of 7,511 in March 2020. This is an indication of a strong bull market and it has a long way to go, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. He, however, warned that from now on, the rally will not be smooth and sharp corrections are likely as valuations are high.

He said geopolitical developments have the potential to trigger corrections. “But recent geopolitical events like the Israel-Gaza war didn’t impact crude prices or markets. Similarly, the skirmishes going on in the Red Sea also may pass without hurting the markets. But there can be a near-term concern that the conflict may widen. So watch out for the events in the Red Sea," he added.

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Sectorally, Nifty media and metal indices were doing well on morning deals. Bank Nifty, however, was flat, dragged by weakness in private sector lenders such as HDFC Bank, Kotak Mahindra Bank and ICICI Bank.

India's largest private sector lender HDFC Bank is to report Q3FY24 results later in the day. A Moneycontrol poll has pegged HDFC Bank's NII at Rs 28,846 crore and net profit at Rs 15,910 crore in the December quarter.

Bank Nifty is ready for breakout as it approaches support zone between 47,500 and 47,000 where buying interest is expected, Bhojane said. "There is an expectation that the support zone will hold, leading to a resumption of an upward movement. On the upside, the levels of 48,900-49,200 are likely to act as immediate hurdles from a short-term perspective," he added.

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