Market Outlook: Indian Equity Indices – October 7, 2024

Summary:

Indian equity indices faced significant selling pressure on October 4, marking the fifth consecutive session of losses. The Nifty index, which briefly dipped below the 25,000 mark during intraday trading, closed at 25,049.80, down 200.30 points (-0.79%). The Sensex followed a similar trend, closing at 81,688.45, down 808.65 points (-0.98%). The broader market exhibited profit booking, with a nearly 1% decline in both Midcap and Smallcap indices.

Market Performance:

• Nifty 50: Closed at 25,049.80, down 200.30 points (-0.79%).
• Sensex: Closed at 81,688.45, down 808.65 points (-0.98%).
• Advance/Decline Ratio: 1,522 shares advanced, 2,266 shares declined, and 101 remained unchanged.

Sector Performance:

• Top Losers: M&M, Bajaj Finance, Nestle India, BPCL, Asian Paints.
• Top Gainers: Infosys, ONGC, Tata Motors, Wipro, HDFC Life.
• Sectoral Indices:
  • Gainers: IT and PSU Bank sectors were the only sectors to show positive performance.
  • Losers: Realty, FMCG, Auto, Power, Media, Telecom, and Oil & Gas indices declined by 1-2%.

Market Drivers:

1. Geopolitical Tensions: Increasing tensions in West Asia and rising crude prices have raised concerns about inflation, dampening expectations for a rate cut by the Reserve Bank of India (RBI) in the upcoming policy meeting.
2. Foreign Institutional Investment (FII): There has been noticeable selling by foreign investors, adding further pressure on the market.
3. Volatility Index: A rise in the volatility index indicated increasing market uncertainty, leading to profit booking.

Technical Analysis:

• The Nifty has shed 1,310 points (-5.2%) since reaching a fresh high of 26,277 last week.
• A key resistance level to watch is 25,600; the overall market bias will remain negative unless this level is reclaimed.

Outlook:

Markets are expected to consolidate in the coming week amid cautious sentiment, especially with the earnings season starting soon. Traders should pay attention to interest-sensitive stocks in light of the RBI policy meeting next week, where while a rate cut may not be on the table, the accompanying commentary will be crucial.

Recommendations:

• Hedging Strategy: Given the current market volatility, adopting a hedged approach is advisable.
• Focus on Resilient Sectors: Key sectors like IT, metals, and pharma have shown resilience; consider reallocating investments toward these sectors while being cautious with those under pressure.
• Stock-Specific Action: Monitor individual stock performances closely as earnings results may drive specific stock movements.

Conclusion:

The Indian equity market continues to experience a corrective phase amid geopolitical concerns and profit booking. With the earnings season approaching and a pivotal RBI policy meeting on the horizon, market participants should remain vigilant and adjust their strategies accordingly.