Sensex recoups initial losses but bears dominant, say experts; 21,000 crucial for Nifty

Watch out 21,000 as a pyschological level for Nifty, say analysts.

Benchmark indices NSE Nifty 50 and BSE Sensex recouped their initial losses to trade in the positive territory into the third week of corporate earnings season. The reprieve comes after two days of correction amid a mixed global set-up.

Experts, however, expect to see intermittent corrections going ahead due to increased volatility and suggest investors to exercise caution in this holiday-shortened week.

At 9:55am, the Sensex was up 373 points or 0.5 percent to 70,744, while the NSE Nifty 50 rose 113 points or 0.5 percent to 21,352.

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"The trigger for the correction came mainly from sustained selling by FIIs. News around Sebi tightening the ultimate beneficiary norms for FPIs from February 1 weakened the FII enthusiasm for the Indian markets. Also, there is a rumour floating around that the finance minister may tweak the LTCG tax taking away the advantages investors are enjoying now," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Sameet Chavan, Technical Analyst, Angel One said that the key support for Nifty is at 21,000, and the index may fall further to 20,800-20,600 range. The resistance is seen at 21,400-21,550.

Broader indices outperformed the benchmarks in the morning deals with the Nifty Midcap 100 and the Nifty Smallcap 100 gaining up to 1 percent. But market consensus rested that the valuations in these segments were still stretched and will experience further fall.

“The valuations in the broader market had become excessive and unsustainable as pointed out many times recently. Further selling by FPIs and more corrections in the broader market are likely. Investors may wait for the market to stabilise,” Vijayakumar said.

India VIX, a measure of expected volatility in market, spurted over 2 percent to cross 15. Barring auto and realty indices, all sectors participated to lift the markets up.

Nifty Media and Nifty PSU, particularly led the pack as they rose 1 percent each within the first hour of trade. Pharma, FMCG, and IT indices were other top sectoral gainers.

Bank Nifty index, which experienced a fall of over 1,600 points in the previous session was up by 0.5 percent to 45,261 on January 24 morning deals. It was supported by index heavyweight HDFC Bank that saw some reprieve after recent selloff, gaining over 1 percent.

On the daily chart, Mandar Bhojane, Research Analyst at Choice Broking

chalked out 44,560 as an immediate support level for Bank Nifty. On the flip side, 46,000, followed by 46,300, would act as resistance, he said.