Nifty, Sensex erase early gains on profit booking; RBI MPC to provide cues

The key event this week is RBI’s monetary policy which will provide direction to the market.

The Sensex and the Nifty wiped out early gains to end flat on February 7 as investors booked profits in heavyweights such as HDFC Bank, Maruti Suzuki and Bajaj Finserv. Participants are waiting for the RBI’s monetary policy outcome on February 8 for directional cues.

Though the Reserve Bank of India is expected to maintain a status quo, its commentary would be closely for rate cut trajectory, analysts said.

The Sensex closed 34.09 points or 0.05 percent higher at 72,152, and the Nifty shut shop 1.10 points or 0.01 percent up at 21,930. About 1,927 shares advanced, 1,329 declined, and 75 remained unchanged.

In the broader market, BSE midcap outperformed, jumping over a percent. The BSE Smallcap index was up nearly half a percent.

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Sectorally, Nifty IT dragged the benchmarks in the afternoon trade, falling over a percent. Nifty PSU Bank capped the losses, rising over 2 percent. Nifty metal and energy also trading with gains of up to 1 percent.

Fundamental view

A significant feature of the ongoing bull market is its ability to bounce back from dips. This makes the 'buy on dips' strategy successful. The bounce back happening in markets recently is supported by IT, autos and pharma, according to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

"The fact that new leaders are emerging to take the market forward indicates that the uptrend is intact and new record highs are possible soon. An area of concern is the excessive speculation in low-grade stocks where many are doubling in a few days. These excesses of a bull market warrant caution. Investors should stay in the comfort of high-quality stocks," he said.

Technical view

On the daily charts, Nifty has been trading in a narrow range since the past couple of weeks. On the upside, 22,000 – 22,050 is acting as a stiff resistance while the key hourly moving averages placed in the range 21,800 – 21,900 have been absorbing all the selling pressure, said Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas.

"The Nifty needs to decisively move beyond this narrow range for the trending moves to begin on either side. Until then, Stock-specific action and sector rotation is likely to continue. Key support levels are 21,730 – 21,680 while immediate hurdle zone is placed at 22,000 - 22,053, he said.

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Bank Nifty closed in the green after falling for three consecutive days. "We expect the retracement to continue till 46,300 – 46,500 over the next few trading sessions. Crucial support is placed at 45,500 – 45,400," he added.

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