Nifty, Sensex surge in Budget week; Q3 earnings, Fed meet to dictate trend

Aside from Nifty FMCG, all sectoral indices were trading higher with Nifty Energy leading the gains with a rally of 5 percent.

Bulls led a robust upswing in benchmark Nifty and Sensex, gaining nearly 2 percent on the first day of the week as investor sentiment turned optimistic. Several index heavyweights surged in trade contributing to the sharp up-move in the headline indices.

Reliance Industries surged nearly 4 percent to new highs, while other giants like ONGC, Adani Enterprises, Coal India, Adani Ports surged up to 8 percent.

The Sensex closed 1,240.90 points or 1.76 percent higher at 71,941, and the Nifty was surged 385.00 points or 1.80 percent at 21,737. About 1,966 shares advanced, 1,382 declined, and 102 shares unchanged.

In the broader markets, BSE Midcap and Smallcap indices jumped 1.68 percent and 1.03 percent. Other than Nifty FMCG, all sectoral indices were trading higher with Nifty Energy leading the gains with a rally of 5 percent.

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According to analysts, the upcoming interim budget will keep the market on its toes this week. "The impact of the Union Budget on the equity market has reduced notably over the past few years, with the government undertaking most of the reforms outside the purview of the budget," said Pranav Haridasan, MD and CEO at Axis Securities.

"The market participants continue to view it as a critical catalyst stimulating the growth of the Indian economy and, thereby, the Indian market," he said.

Another critical event to watch is the outcome of the US Federal Reserve's policy meeting scheduled for January 31, which could provide insights into the potential timing of interest rate cuts.

Concurrently, ongoing Q3 earnings releases are contributing to substantial stock price movements, with numerous companies, including L&T, Bajaj Finserv, Maruti, Shree Cement, Titan slated to announce their results this week.

The Q3FY24 results seem to defy both numbers and narratives. Net profits of the Nifty-50 Index grew 18 percent, 4 percent above expectations, said Kotak Securities.

The brokerage believes that one will get a better sense of sustainability of the investment cycle in the next few days as companies in the capital goods sector report their earnings and give guidance on near-term order inflows, and the government presents its interim budget, which will give guidance on government capex for FY25.

According to analysts at Kotak, the market is either overestimating the market size and profitability in several sectors or underestimating ‘disruption’ risks in some sectors.

Foreign institutional investor activity remains a focal point, given their substantial net sales exceeding Rs 35,000 crore in the Indian equity market this month, said Santosh Meena, head of research at Swastika Investmart Ltd. Beyond domestic factors, the market will be influenced by the global landscape, including geopolitical developments and movements in US bond yields, the dollar index, and crude oil prices.

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"Markets have bounced back strongly after the last two weeks of correction on the back on Reliance. Technically, 21,750 is a strong resistance for the Nifty around which we expect the current rally to cool off. Supports are placed at 21,137 and 20,870 on the downside," said Rahul Sharma, director and head of technical and derivatives research at JM Financial Services Ltd.

For Bank Nifty, sustaining above 200-DMA of 44,500 may trigger a short-covering bounce, targeting crucial supply zones at 46,000–46,300 for strength. However, breaching the 200-DMA could lead to additional weakness, potentially extending towards the 43,300 level, said Santosh Meena

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