Market Snapshot: D-street closes the initial week of 2024 in the red. What’s next in store?

As the curtain rose on 2024, Indian equity markets found themselves in a tug-of-war between optimism and apprehension. The first week ended with a muted decline, reflecting a cautious mood fuelled by a confluence of domestic and global factors.

Red Sea Ripples and Slowing Industries:

The specter of disruptions in the Red Sea due to the recent incident involving a container ship cast a shadow over global supply chains, raising concerns about potential increases in freight costs. Closer to home, India’s industrial output painted a less-than-rosy picture, with the core market sector growth slipping to a six-month low in November 2023. These headwinds combined to exert downward pressure on sentiment.

Benchmark Blues:

The BSE Sensex dipped 214 points (0.3%) to close at 72,026, while the Nifty shed 21 points (0.1%) to 21,711. Despite the modest losses, the week wasn’t devoid of bright spots. Sectorwise, real estate shone bright, surging 7.9%, buoyed by expectations of robust demand and positive housing loan data from banks. Power and healthcare also navigated the choppy waters with gains of 3.4% and 3.3%, respectively. On the flip side, the metal sector bore the brunt of the negativity, slumping 1.9%.

Market Snapshot: Winners and Losers:

Adani Ports emerged as the week’s champion, its stock soaring 12.7% on the back of positive investor sentiment. Oil & Natural Gas Corporation, Bajaj Finance, Tata Consumer Products, and Cipla followed suit, registering gains exceeding 3%. At the other end of the spectrum, Eicher Motors, JSW Steel, and Shree Cement bore the brunt of the selling pressure, with their stocks plummeting over 5%.

Technical Forecast:

The technical outlook remains shrouded in some uncertainty. Nagaraj Shetti of HDFC Securities observes that while Nifty managed to close higher on Friday after a volatile session, the formation of a “doji” pattern at the highs suggests caution for bulls. He believes that the short-term uptrend remains intact, but resistance awaits around 21800-21850 levels. A decisive break above this zone could pave the way for a move towards 22200. He advises traders to watch for support around 21500 in case of dips.

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Global Woes and Local Hopes:

Vinod Nair of Geojit Financial Services attributes the week’s flat performance to a tug-of-war between positive expectations about future rate cuts and anxieties arising from weak manufacturing data in China and the Eurozone. Additionally, the minutes from the Fed’s last meeting added to the uncertainty by hinting at a potential delay in rate cuts.

Nair notes that the IT and auto sectors were the biggest casualties of this global unease, exhibiting weakness throughout the week. However, he finds solace in the resilience of the mid and small-cap segments, which continued their ascent fueled by retail inflows. The stellar performance of the realty sector, he believes, can be attributed to optimistic sentiment on the back of healthy demand and housing loan data.

Looking Ahead:

As the first week of 2024 draws to a close, Indian markets find themselves at a crossroads. The upcoming earnings season holds the key to unlocking the next direction. If corporate earnings manage to beat expectations, it could provide the necessary fillip to propel markets higher. However, if they disappoint, the lingering global headwinds could reignite selling pressure. The next few weeks will be crucial in determining whether D-Street can ride the turbulence and chart a course towards sustained upward momentum.