Sensex, Nifty fall in choppy trade, analysts say correction 'healthy'

Market sentiment is currently to stay on 'light' positions after a non-stop bull run

Equity benchmarks the Sensex and the Nifty 50 were trading low on December 13 as hot inflation prints in India and the US raised bets that the central banks would be in no hurry to ease interest rates and switch to a dovish stance.

Analysts say the correction is “healthy” for markets, reading it as nothing but an “exhaustion” of bullish sentiment.

"There is no reason to panic," said Gaurang Shah, Senior Vice President at Geojit Financial Services. Since December 8, Sensex and Nifty 50 have seen a fall of 0.4 percent. "If we see a decline of more than 1 percent, we can term it correction, this is just healthy for markets," Shah said, advising investors to use every dip to buy stocks selectively.

At 10.25 am, the BSE Sensex was trading 281 points, or 0.4 percent, to trade at 69,269, while the Nifty slipped 94 points or 0.4 percent, to 20,812 levels.

In recent weeks, the benchmarks have been on a record-breaking spree, with the Sensex hitting 70,000 after the Nifty scaled a new peak of 21,000.

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Market sentiment is currently to stay on “light” positions after a non-stop bull run.

"Traders have opted to take money off the table ahead of the US FOMC outcome and stay light on positions," said Sameet Chavan, Technical Analyst - Angel One.

The US Federal Reserve will later in the day share the outcome of its last policy review of 2023 in which it is expected to hold rate. The commentary will be closely tracked for clues to rate cut plans.

The market trend could be a sign of bullish exhaustion, which would attract some price-wise correction post a sharp rally, Chavan said. "The recent development could be seen as the sign of cool-off amidst overbought parameters," added Sameet Chavan of Angel One.

"From the global perspective, tonight’s Fed message is important in setting the global market trend. Markets will wait for the Fed chief’s message before taking a decisive turn," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Though market participants are betting interest rates to be on “hold” at 5.25-5.5 percent in the US, the roadmap to easing interest rates might be delayed. The move to cuts would represent a major pivot for the Fed after 11 interest rate hikes.

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Amit Pabari, Managing Director at CR Forex, said the market sentiment would lean on FOMC's economic growth projections and the dot plot. "The markets have already factored in steady rates in today's Fed policy," he said.

The growth projections, which include forecasts for inflation, economic expansion and the expected path of interest rates spanning 2024, 2025, 2026, and the long term, will provide insights into the US central bank’s outlook. And, that is what investors will be watching closely.

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