Sensex, Nifty end lower, consolidation likely to continue ahead of Q3 results

Volatility is likely to ensue this year due to big event due in May - 2024 general elections, said analysts

The benchmark indices traded lower for the second straight day on January 3 as participants wait for the next trigger to get the momentum going. For now, investors will track the US Federal Reserve's interest rate outlook from the FOMC minutes, to be released later in the week.

The October-December (Q3) quarter results, too, will guide traders to selective stock picking, analysts said. The result season begins next week.

"It is vital for companies to meet what is Street is building in. Any miss in Q3 result estimates may tailspin the markets into consolidation," Aishvarya Dadheech, founder and chief investment officer (CIO), Fident Asset Management, told Moneycontrol.

Hemen Kapadia, Senior VP- Institutional Equity, KR Choksey Securities, expect the downside for the Nifty to deepen but said the correction is “not a trend reversal”.

"We expect consolidation to be the norm in the next few sessions, with resistance placed at 21,800 levels," he told Moneycontrol.

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On January 3, the Sensex was down 0.7 percent to 71,356, while the Nifty slipped 0.7 percent to 21,517.

Broader indices performed better. The Nifty midcap 100 index surged up to 0.3 percent, whereas Nifty Smallcap 100 ended flat. The market consensus, however, rested on the fact that these segments were “overbought” and sectoral rotation to largecaps should be optimised by traders.

"Volatility is likely to ensue this year due to big event due in May — the 2024 general elections. We expect sectoral rotation to largecaps from mid and smallcap pockets, (it) should be utilised by traders as capital preservation is important from here and easy money-making opportunity is behind us," Dadheech said.

Most sectors wiped off losses to trade in positive territory in the later half of the session. The Nifty PSU Bank was the star sectoral gainer, surging over a percent. Realty and oil & gas indices were also among the top gainers.

Traders again dumped technology-oriented stocks, with Nifty IT slipping more than 2 percent. The metal index was down over a percent.

The base case of policy continuity may limit volatility around the election period, George Thomas, Fund Manager - Equity, Quantum AMC, said.

"While the current setting does not indicate chances of a material correction, staggered investments should be considered as an optimal strategy," he added.

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