Nifty, Sensex fall over 1% for the week, analysts expect further weakness

On January 20, profit booking was noted in IT and FMCG, while private banks witnessed selective buying post the recent sharp correction and stable Q3 earnings

NSE Nifty 50 and BSE Sensex opened higher on January 20 but slipped into negative territory in the afternoon to close in the red, amid weak trading volumes and weekly expiry. For the week, both Nifty and Sensex fell close to 1.5 percent.

Going ahead, analysts expect sideways trend or further weakness in the run up to the interim Budget, Q3 results, and global interest rate decisions.

At close on January 20, the Sensex was down 259.58 points or 0.36 percent at 71,423.65, and the Nifty was down 50.60 points or 0.23 percent at 21,571.80. Markets closed in the red after seeing a brief breather on January 19.

"Domestic markets exhibited a subdued trend influenced by extended holidays, low volumes, and weekly option expiration. Next week, the interest rate decisions of the Bank of Japan and ECB, along with US GDP data, are anticipated to drive the market dynamics," Vinod Nair, Head of Research, Geojit Financial Services said.

Also Read: Expect some housing incentives in Budget, prefer private over PSU banks: Macquarie’s Suresh Ganapathy

On January 20, profit booking was noted in IT and FMCG, while private banks witnessed selective buying post the recent sharp correction and stable Q3 earnings. Kotak Mahindra Bank gained over 2.5 percent after posting Q3 results as the Street cheered its stable net interest margins, unlike the disappointment posted by its bigger peer HDFC Bank.

Meanwhile, ICICI Bank gained 1.2 percent ahead of its results. After market hours, the bank posted 23 percent year-on-year jump in its net profit at Rs 10,272 crore. Margins contracted sequentially to 4.43 percent from 4.53 percent.

The biggest loser on Nifty 50 was Hindustan Unilever, falling over three percent. Brokerages cut their target prices on HUL stock, citing the FMCG major’s low volume recovery in Q3 and uncertainty going ahead.

While frontline indices closed in the red, broader markets showed resilience on January 20. Nifty Midcap 100 gained 0.56 percent in the day and Nifty Smallcap 100 closed 0.21 percent higher.

Also Read: Sebi probing mule accounts, faulty IPO applications, 3 cases under scanner, says Buch

"Mid and smallcap indices have been delivering decent performance so far, but there's limited reason to expect a significant upmove from hereon though, given the expensive valuations," Nirav Karkera of Fisdom said.

Levels to watch

According to technical experts, the Nifty has formed long bearish candle on weekly charts and it is trading below 20 day SMA (simple moving average) which indicating further weakness from the current levels.

"We are of the view that, 20-day SMA or 21,700 would act as a crucial resistance zone for the short-term traders. Below the same, the market could correct till 21,400. Further down side may also continue which could drag the index till 21,250," Amol Athawale, vice president - technical research, Kotak Securities said.

On the flip side, he added, above 20-day SMA, Nifty could move up till 21,820.

Also Read: Cycle of local players entering market almost over, says HUL's Rohit Jawa

On the Bank Nifty, the index needs to overcome the immediate resistance at 46,300, analysts said.

"A breakthrough that could trigger short-covering, propelling it towards 46,500/46,800 levels. However, a close below the crucial support of 45,600 might instigate a substantial downside correction towards 44,000," Kunal Shah, senior technical and derivative analyst at LKP Securities said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.