Sensex, Nifty rebound from day’s lows but near term worries persist

The coming week will also be event heavy with multiple results and the interim budget on Thursday 1st Feb.

Benchmark indices BSE Sensex and NSE Nifty shrugged off initial jitters to gain about a percent as investors saw an opportunity to buy stocks on dips on January 24. However, short term worries especially in terms of heavy foreign institutional investor (FII) selling persist.

Some volatility was seen during the day as monthly and weekly futures and options (F&O) contracts for Nifty are set to expire tomorrow. Quarterly earnings showdown of key companies also helped set the mood of the market.

At close, the Sensex was up 689.76 points or 0.98 percent at 71,060.31, and the Nifty was up 215.20 points or 1.01 percent at 21,454.00. About 2,131 shares advanced, 1,503 shares declined, and 108 shares  remained unchanged.

“We expect the domestic and FPI volumes to remain tepid during truncated week , as most long only investors stay defensive and wait for clear trading trends to emerge in the last week of January. However, over the medium term we expect flows to pick up gradually, given the inflation stability and expected political steadiness post elections,” said Jaykrishna Gandhi, Head - Business Development, Institutional Equities, Emkay Global Financial Services.

In the previous session, foreign investors net sold Indian equities for the fifth straight session. The net withdrew equities worth Rs 3,115.39 crore while domestic institutional investors net bought equities worth Rs 215 crore.

In the last five sessions, FIIs have net sold equities worth Rs 27,830 crore, NSE data compiled by Moneycontrol shows. During January, they have net withdrawn Rs 26,699 crore from the equity market.

There are only three trading sessions during this week as no trading happened on Monday. Friday is an off day as India will be observing Republic Day.

During the day, Nifty Bank wiped off most of early gains and closed the day up 0.15 percent at 45,082.40. Barring Nifty Private Bank that slid 0.24 percent, all other sectoral indices on NSE closed in the green.

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, said that the bulls made a strong comeback, successfully defending the crucial support level of 44,500, where fresh put writing activities were observed.

"Despite the rebound, the index is still navigating a downtrend. A potential pullback rally towards the 45,500 mark is anticipated. However, a significant development would be the index closing above 45,500, triggering further short-covering moves towards the 46,000 level, characterized by the highest open interest on the call side," said Shah.

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