Sensex, Nifty extend muted moves, analysts see consolidation 'desirable' for markets

Any move on either side will lead markets to the next move, say analysts

The muted moves across domestic markets was extended to December 19 morning deals after bulls kept ruling the Street for seven weeks in a row in their longest rally in three years. The fatigue seemed to have continued with the market staying in a phase of consolidation after experts flagged an 'overbought' zone for the indices.

On December 19 morning deals, the S&P BSE Sensex slipped 141 points or 0.2 percent to 71,174 levels, while the NSE Nifty 50 was down 43 points or 0.2 percent to 21,375 levels.

However, Sacchitanand Uttekar, DVP-Technical (equity) at Tradebull Securities said that he does not believe that the Nifty would fall below 21,000-mark. "We expect some slippages in the near-term, but do not expect Nifty to breach below 21,000 levels," he told Moneycontrol.

Also read: Kotak Securities anticipates limited upside for Nifty levels next year: Here’s why

Calling this correction "desirable", VK Vijayakumar, chief investment strategist at Geojit Financial Services, said that this period of consolidation would make the market healthy that saw a sharp run-up through the last two weeks.

The market consensus rested on the fact that sideways trading would continue for the next couple of days. "Markets will remain sideways for the next few days, as the second half of December typically witnesses a shrink of volumes," said Om Mehra, technical analyst at SAMCO Securities.

Technically, the Nifty is expected to consolidate in the range of 21,200-21,500, shared Deven Mehta, research analyst at Choice Broking. "Any move on either side will lead markets to the next move."

In the first hour of trading, the broader markets, too, experienced a decline after seeing stupendous rally so far this year.

The Nifty Midcap 100 slipped 0.8 percent, whereas Nifty Smallcap 100 declined 0.5 percent, as of 10:15am.

Terming mid-caps and small-caps as "risky", Vijayakumar advised investors to avoid these over-valued pockets which have run up "too much too fast" on retail exuberance. "The next bout of buying by institutions is likely to begin in the early days of New Year," he said.

Also read: Daily Voice | What makes this market veteran bullish on BFSI and tech large-caps for next year

As markets exhibited subdued performance, investors resorted to defensive plays.

Nifty FMCG was up 0.6 percent, whereas Nifty Consumer Durables rose 0.1 percent in early deals.

That apart, Nifty Oil & Gas gained mildly after the government reduced the windfall tax on domestically produced crude oil and diesel exports.

The top sectoral laggard was the Nifty IT index that saw some profit-booking after the sector hit an all-time high last week. Others like media, metal, auto, and banking indices also slipped in the negative territory.

Against this backdrop, analysts advise investors to buy high-quality large-caps on dips. Vijayakumar recommended PSU banks as another pocket of safety as it is attractively valued.

Also read: PSU banks set for re-rating, Motilal Oswal raises target prices for SBI, PNB, BoB

Motilal Oswal, too, in its recent report upgraded the target prices for State Bank of India, Canara Bank, Indian Bank, Bank of Baroda, and Punjab National Bank, saying that the overall PSB sector is well-poised for re-rating going ahead.

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