Mid-day Mood | Profit booking seeps in as indices trade in red; pharma stocks shine

The market had witnessed erratic moves in the previous session as well, having settled near the flatline.

The Nifty and Sensex traded in the red as of afternoon trade on January 2 as investors to book partial profits after the bull run in the market in 2024. Index heavyweight stocks like ICICI Bank, Reliance Industries, Infosys and L&T also faced strong selling which put further pressure on the two benchmarks. However, even as heavyweights roiled under selling pressure, pharma majors like Dr Reddy's, Divi's Labs and Sun Pharma emerged as the top gainers on the Nifty, backed the sector's strong growth outlook.

At noon, the Sensex was down 555.14 points or 0.77 percent at 71,716.80, and the Nifty was down 134.60 points or 0.62 percent at 21,607.30. About 1,342 shares rose, 1,892 fell, while 87 were unchanged.

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Sectoral trends

All sectors except pharma and healthcare traded in the red. Among them, the automobile sector was the worst hit following lower-than-expected sales by most automakers for December. As a result, the Nifty Auto index was down 1.4 percent.

Another major laggard was Nifty IT which slumped 1.5 percent. Banks, metals, FMCG, infra and realty indices were also down 0.5-1.2 percent.

On the other hand, strong growth prospects coupled with defensive buying lifted the Nifty Pharma index over 2 percent higher.

Fundamental view

"The 1,000 point rally in the Nifty in the last one month has imparted momentum to the market. Retail investors encouraged by the excellent returns of 2023 have turned exuberant and are chasing stocks, unmindful of the high valuations, particularly in the mid and small cap segments," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

He advised investors to not fall into the trap of ‘recency bias’ and chase low grade stocks in the broader market.

An important trend that according to Vijayakumar, remains on the watchlist is the spike in the volatility index VIX to 14.5 which indicates that high volatility is round the corner. "The sell off in the last half an hour of trade in the previous session is a warning that at higher levels there can be bouts of big selling," he added.

Technical view

"The market is expected to remain range-bound, with the Nifty 50 finding immediate support in the 21,550-21,600 level and resistance in the 21,800-21,850 zone," said Deven Mehata, derivative analyst at Choice Broking.

"A big breach of 21,850 can send the index to 22,000, while a break of the same support can send it to 21,500. As a result, short-term or intraday traders have the option to trade on both sides, with Nifty acquired around support levels and profits booked near resistance levels," Mehata added.

Key Nifty gainers

Dr Reddy's, Divi's Labs, ONGC, Coal India and Sun Pharma

Key Nifty losers

Eicher Motors, Ultratech, Larsen & Toubro, M&M, Wipro

Key Sensex gainers

Sun Pharma, Bajaj Finance, Bharti Airtel

Key Sensex losers

Ultratech, M&M, Wipro

Stock moves

Lupin: Shares of Lupin soared over 5 percent buoyed by brokerage firm Nomura's bullish growth outlook for the drugmaker. Nomura's bullish outlook on Lupin is largely driven by the drugmaker's robust US pipeline and growth in the India business amid field force expansion and strong presence in the chronic segment. The firm also revised its price target for the stock upwards to Rs 1,593 as it anticipates a 20 percent upside potential.

Zomato: Zomato shares opened higher on January 2 as international brokerage CLSA stays bullish on the stock after the food delivery major raised its mandatory platform fee, charged from users, from Rs 3 to Rs 4 in its key markets. According to CLSA, the 33 percent platform fee hike would partially offset the impact of GST on delivery charges.

Ashok Leyland: Shares traded 3 percent lower after the company reported a 10 percent decline in its total sales in December. During the month, the bus and truck manufacturer sold 15,323 units as against 17,112 units in December 2022.

Also Read | Nifty, Sensex extend losses, analysts expect volatility to persist in markets

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