Nifty, Sensex gain for 3rd straight day amid high volatility, analysts predict consolidation

Analysts expect the market to consolidate in a broader range and take cues from the upcoming earning season.

The benchmark Indian indices managed to end higher on January 10 amid high volatility as investors preferred to stay on the sidelines ahead of the CPI inflation data and key Q3 earnings this week. The Sensex closed 271.50 points or 0.38 percent higher at 71,658, and the Nifty was up 73.90 points or 0.34 percent at 21,619.

About 1772 shares advanced, 1495 shares declined, and 75 shares unchanged. Cipla, Reliance Industries, Adani Enterprises, HCL Technologies and Adani Ports were the top Nifty gainers, while losers were ONGC, Divis Labs, BPCL, NTPC and Power Grid Corporation.

In the broader markets, BSE Midcap and Smallcap indices ended marginally higher. Healthcare, Information Technology and Metal indices gained 0.4 percent each, while Oil & Gas index fell half a percent.

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The market is looking for fresh triggers for a direction, and the release of US and Indian inflation data may provide a near-term direction in the market, said Vinod Nair, Head of Research, Geojit Financial Services.

"The investor's focus will be shifted to the earnings season, on a sequential basis, the earnings growth is likely to be lower, while the expectations for auto, capital goods, and cement will remain strong," he added.

Nifty, Bank Nifty Technical view

On the daily charts, Nifty has held on to the support zone of 21,500 – 21,460 where support in the form a Fibonacci retracement level and the crucial 20 day moving average (21,489) was placed. Buying interest has emerged from crucial support zone and the hourly momentum indicator has triggered a positive crossover which is a buy signal.

"Thus, both price and momentum indicator are suggesting continuation of the positive momentum. On the upside initial hurdle is placed at 21730 – 21750 while immediate support is placed at 21,520 – 21,500," said Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas.

"We expect the Bank Nifty to continue with the positive momentum going ahead. Initial hurdle is placed at 47,550 – 47,680 while support zone is placed at 47,100 – 47,000," he added.

Q3 earnings to guide market direction in near term

"The market is moving up and down without a directional trend. Up-moves are countered with selling and down-moves are responded with buying. A trend might emerge in the coming days in response to Q3 results," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

According to Vijayakumar, there is an important dichotomy in the market which has implications for investors. Segments like defence and railways have run up too much too fast based on expectations triggered by order inflows. It will take time for these orders to be executed and reflect on the bottomlines.

On the other hand, there is value in segments like banking, particularly in high-quality private sector majors. But this value is not getting reflected in the price, he said.

"This is a short-term aberration that will correct in the medium to long term. Here patience is the key. Q3 results starting January 11 will be keenly watched. Regarding IT the management commentary will be more important than the results which will be tepid," said Vijayakumar.

Also read | Stagnant FMCG volume growth In December quarter, say analysts

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