Sensex, Nifty break 2-day fall, but analysts expect profit-booking to continue

Indian indices will dance to global market momentum as there no immediate triggers

Domestic benchmark indices Sensex and Nifty 50 snapped two-day losing streak, supported by gains in banking stocks. However, analysts believe that markets would trade sideways in the near-term in the absence of immediate triggers.

Sensex and Nifty gained up to 0.3 percent to 71,595 and 21,782, respectively on February 9. Bank Nifty helped pull the benchmark forward as it gained over 1 percent. Meanwhile, fear gauge India VIX cooled off by 3 percent to 15.3 level.

"Indian indices will dance to global market momentum as there no immediate triggers. The turnaround would come in April once fresh inflation data is in and corporates announce their fourth quarterly financials," said Vinit Bolinjkar, Head of Research at Ventura Securities.

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In the process, Bolinjkar said that markets would undergo bouts of profit-booking. "Investors will book profits time-to-time, especially in mid-and smallcaps. The end of financial year also means that investors would churn their respective portfolio positions," he added.

Raja Venkataraman, Co-Founder at NeoTrader, on the other hand, advised investors to stay away from index and eye sector-specific opportunities. "Investors must check if their stock or current holding after Q3 results is playing out or not," he told Moneycontrol.

On the charts, Venkataraman chalked out 21,750 as an immediate support for Nifty as it heads into next week's expiry. The performance of PSU Banks must be watched out as it can pull the Nifty forward, he added.

Meanwhile, broader markets underperformed benchmarks on February 9 as Nifty Midcap 100 and Nifty Smallcap 100 indices slipped 1 percent each. Analysts link the underperformance to RBI and US Fed's unexpected decision to not cut rates.

Other than this, Nifty Metal and Oil & Gas indices emerged to be top losers on February 9, while banking and healthcare stocks took the lead.

That being said, it depends on how long equities continue to remain favourable as talks of rate cut got dashed by central banks across the globe. This has prompted a rise in US treasury yields and dollar index.

After the US Federal Reserve officials indicated that rate cuts would not soon be a reality, the Reserve Bank of India (RBI) also maintained a hawkish pause in its February monetary policy meeting. Going ahead, analysts believe that rate cuts could further be delayed into the second half of 2024.

Until there is a consensus in Street that rate cuts would not soon be a reality, markets would continue to remain jittery, warned Bolinjkar of Ventura Securities.