A historic week for Indian markets as both Sensex and Nifty50 climbed fresh peaks. The S&P BSE Sensex climbed Mount 50K while the Nifty50 also hit 14753, but profit-taking towards the close of the week pushed indices in the red.
The S&P BSE Sensex fell 0.3 percent while the Nifty50 was down by 0.4 percent for the week gone by but a bigger cut was seen in the small & midcaps.
The S&P BSE Midcap index fell 0.7 percent while the S&P BSE Smallcap index was down 1.3 percent for the week ended January 22.
However, there are 21 stocks in the S&P BSE 500 index that bucked the trend that include names like DCM Shriram, Bajaj Auto, Ceat, Apollo Tyres, Gateway Distriparks, JK Tyre, Tata Motors, and Future Consumer etc. among others.
The stock market cheered the smooth transition of the US President and strong December quarter results from India Inc. amid the ongoing pandemic. Vaccine rollout also helped the sentiment, but after a strong rally, some pullback was on the cards.
“Broader markets experienced profit booking by the close of the week along with larger indices. While the results have been supportive so far, the overall sentiment is to wait-and-watch as the budget is about to be the key trigger to assess the future direction of bourses in the short term,” Umesh Mehta, Head of Research, Samco Group told Moneycontrol.
“Volatility is expected to remain high as bulls and bears continue to play tug-of-war given but in the end bears might win given the overbought nature of many stocks and the high expectations from the Budget. If expectations aren’t met then there could be a short-term correction,” he said.
The strong corporate performance of industry leaders such as Bajaj Auto, Asian Paints, as well as Reliance Industries give confidence to investors that the recovery is underway.
Although, foreign investors pulled out money from Indian markets on Friday, but they still remain net buyers of more than Rs 21,000 cr in the cash segment of Indian markets.“The market up-move has been on the back of continued improvement in economic activity even as foreign institutional inflows into India remain strong and positive news flow around the COVID vaccination drive. CY21 saw ~USD 23bn of net FII flows into the Indian equity markets,” Shibani Sircar Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company told Moneycontrol.
Markets could well remain volatile ahead of the January F&O series, and Union Budget. Investors are advised to remain cautious and stay with economy-linked sectors.
“With the budget date nearing, markets have gotten cautious and have shed some of its gains this week. Investors should look at this as an opportune time to assess companies and invest on dips in quality stocks. Traders can go light on the long side,” says Mehta of Samco Group.
“With the budget touted to be in favour of infrastructure development and focus on stimulating economic activity further, Infra, Realty, and Banks would be sectors which will be watched by investors for new opportunities,” he added.
Profit booking was seen at higher levels as Sensex achieved the psychological mark of 50000 after a 12 percent rally in the previous three weeks. The Nifty closed at 14372, down 0.4% over the week.
Experts are of the view that profit booking could continue if the Union Budget fails to meet expectations, or Nifty50 falls below 14000-14200.
“For the next few trading sessions, 14220/48400 should be the sacrosanct level for the trend following traders, if it sustains above the same then uptrend texture likely to continue up to 14600-14750/48800-49100,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities told Moneycontrol.
“Further upside may also be possible that could lift the index till 14855/49450. On the flip side, dismissal of 14220/48400 possibly open another leg of correction till 14125-14000/48100-47600,” he said.
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