After Indian benchmark indices Sensex and Nifty hit fresh lifetime highs of 80,481 and 24,461 on July 10, it retreated later in the day due to a broad-based selloff. Analysts view this consolidation as a healthy pause before the upcoming April-June quarter (Q1FY25) results and 2024 Union Budget, suggesting it will strengthen market breadth for future gains.
The Sensex was down 426 points or 0.53 percent at 79,924, and the Nifty was down 108 points or 0.44 percent at 24,324. The market breadth weighed towards declines - around 1,141 shares advanced, 2,287 shares declined, and 59 shares were unchanged.
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Vinod Nair, Head of Research at Geojit Financial Services termed this correction as 'normal' given both Sensex and Nifty have been touching new lifetime highs day after day. Moving forward, he believes India Inc's Q1 results and 2024 budget presentation will set the market's tone.
"It will be interesting to watch how the Q1 results pan out. Street chatter indicates a modest 9-10 percent profit growth in Nifty 50 earnings, compared to over 20 percent profit growth seen in the last fiscal year. If earnings fail to keep up with the elevated valuations across markets, we can expect some correction down the line," he cautioned.
As an investment strategy, Nair suggested sticking with quality large-caps over midcaps and picking out FMCG or consumption plays, citing comfortable valuations and underperformance.
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Technically, analysts at ICICI Securities highlighted this breather to be 'temporary' after five weeks' sharp upmove of 15 percent. "Any dip from here on should not be construed as negative instead get capitalised as a buying opportunity with Nifty's key support placed around 23,700. On the upside, we expect Nifty to gradually head towards 24,700 soon," they said.
Broader markets also took a beating on July 10, with the BSE Smallcap index bearing the major brunt by declining over 0.7 percent, whereas the BSE Midcap index slipped by 0.1 percent.
While the majority of sectors drowned in the sea of red on July 10 led by the Nifty Auto index, Nifty FMCG and Nifty Pharma indices stood as outliers, gaining up to 0.3 percent. Meanwhile, fear gauge India VIX ticked up by a percent to settle at 14.4 level.
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