Stock Market Down: The Indian stock market witnessed a sharp decline on Tuesday with benchmark indices Nifty 50 and Sensex plummeting over 650 points during the session, as per a report by Mint published on January 2, 2024. According to market experts, profit-booking after the recent rally and position rebalancing ahead of the third quarter results season were the key reasons for Tuesday’s fall.
The Sensex closed 662 points lower at 59,646 while the Nifty 50 index settled below the psychological 18,000 mark at 17,758, down 179 points. All sectoral indices ended in the red with metal, realty and IT stocks witnessing steeper declines.
The headline of the Mint report read “Why Indian stock market is down today? Experts list out these two reasons” highlighting the two main factors behind the market fall as explained by analysts.
Why is Stock Market Down Today?
“The market has gained over 3,000 points in Nifty in the last two months. So some bit of profit-booking was expected at higher levels as the bulls tend to book profits ahead of the earnings season,” said Sandeep Pandey, Head of Research at Basav Capital.
Pandey added that 18,300-18,400 is a strong resistance zone for Nifty and we may see consolidation in the coming weeks. “For bottom fishers, this correction offers an incremental buying opportunity in high quality large-cap names like Tata Consumers, ITC, JSW Steel and Wipro which can deliver steady returns over the next 2-3 years,” he said.
Echoing similar views, Saurabh Jain, AVP Research at SMC Global Securities said, “The initial uptick was driven by positive global cues, but profit-booking kicked in at higher levels. The fall can also be attributed to position rebalancing by institutional investors ahead of the Q3 results season.”
According to Pandey, the Nifty has gained over 3000 points in the last two months, so some profit-booking at higher levels was on expected lines. The 18,300-18,400 zone is a strong resistance for Nifty and consolidation can be expected ahead of the Q3FY24 results season.
Jain concurred that the initial uptick was driven by global cues, but profit-taking and position rebalancing caused the indices to pare gains. This view aligns with Pandey’s assessment that investors booked profits at higher levels ahead of the earnings season.
The Q3 earnings season will kick-start next week and the management commentary will set the tone for the market, especially on the margin pressure front amid rising input costs. Auto companies will also start reporting monthly sales data from next week which will give more clarity on the demand situation.
Overall, analysts advise maintaining a balanced approach in the near-term. The bias still remains positive from a long-term view, but bouts of volatility cannot be ruled out amid mixed global cues, rising Omicron cases and ahead of the Union Budget. Investors should utilize dips to buy quality names while keeping extra caution on position sizing.
According to Jain, capital goods, infrastructure, hotels and FMCG stocks look attractive at current levels from a medium to long-term perspective. Pandey suggests bottom fishers look at large-caps like Tata Consumers, ITC, JSW Steel and Wipro which can give steady returns over 2-3 years.
The Q3 results season starting next week will be crucial as management commentaries will guide the market outlook, especially on margin pressure due to high input costs. Monthly auto sales numbers will also provide clarity on demand.
In summary, analysts say investors should maintain balance in the near-term given the volatility. The long-term bias remains positive but bouts of fluctuation can’t be ruled out given global factors, Omicron spread and ahead of the Budget. Investors should capitalize on dips to buy quality stocks while managing position sizing diligently.
