Nifty50 Outlook: Strong Sector Performance Amid Mixed Market Sentiment

The Indian stock market saw mixed performance in the week ending January 5, with the BSE Sensex gaining 524 points, or 0.66%, to close at 79,223.11, while the Nifty50 added 191 points, or 0.80%, to finish at 24,004.75. Despite these gains, broader market indices performed better, with BSE large-cap, mid-cap, and small-cap indices rising 1%, 1.3%, and 2%, respectively.

Key sectors such as Nifty Auto and Nifty Oil & Gas were among the top performers, surging by 4% and 3.4%, respectively. Meanwhile, the Nifty Energy and FMCG indices also saw positive movements, adding 2.4% each. However, the Nifty Realty index saw a 2.5% decline.

Foreign Institutional Investors (FIIs) were net sellers, offloading equities worth ₹11,041.59 crore, while Domestic Institutional Investors (DIIs) continued their buying support, purchasing equities worth ₹9,253.7 crore. Despite the market’s overall positive movement, the week ended on a cautious note due to external pressures, including a strong US dollar, high valuations, and continued FII outflows.

Vinod Nair, Head of Research at Geojit Financial Services, noted that the auto sector outperformed due to robust December sales, defying typical seasonal slowdowns. However, mid and small-cap stocks showed only a tepid recovery compared to their large-cap counterparts. He pointed out that investors are shifting to a multi-asset strategy amid concerns over the weakening Indian Rupee, high valuations, and global uncertainties, including potential economic policies under President Trump.

Looking ahead, market focus will likely shift to upcoming Q3 results, which are expected to show improvements on a quarter-on-quarter basis. Investors are also expected to adjust their portfolios in anticipation of the Union Budget, with key events such as the FOMC minutes and US non-farm payrolls influencing market sentiment.

Key Performers and Decliners

The BSE Small-cap index gained 2%, with stocks like Apollo Micro Systems, ITI, and Saregama India seeing substantial gains of 15-40%. On the downside, stocks such as Banco Products, Surya Roshni, and Jai Corp faced steep declines, shedding between 7% and 54%.

Nifty50 Technical Outlook

Several technical analysts have weighed in on the near-term outlook for the Nifty50 index:

  • Aditya Gaggar of Progressive Shares highlighted that the Nifty50 is currently within a Symmetrical Triangle Formation, with key support at 23,900 (200DMA) and resistance at 24,130 (50DMA). A breakout above 24,130 could push the index toward 24,650, while a drop below 23,900 might take it to 23,650.
  • Devarsh Vakil of HDFC Securities pointed out that immediate support for the Nifty is at 23,933 and 23,843, with resistance at 24,226. A breakthrough above this level could take the index to 24,400-24,500.
  • Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, confirmed that the Nifty’s near-term uptrend remains intact, with support levels around 23,930-23,840. A move above 24,226 could see the index climbing to 24,400-24,500.
  • Rupak De of LKP Securities noted that the Nifty had a minor correction after failing to break above the 50 EMA on the daily timeframe. However, the index remains bullish with the RSI showing a positive crossover. A breakout above 24,220 could push the Nifty towards 24,500, while a drop below 24,000 could lead the index toward 23,700.

While the market showed strength in certain sectors, a sell-on-rally sentiment prevailed due to external challenges, including a stronger US dollar and FII outflows. Investors should monitor the upcoming earnings season and key macroeconomic events for further clues on market direction. The Nifty50’s technical levels will also play a crucial role in determining the near-term trend, with significant support and resistance points to watch.

Disclaimer: The views and recommendations presented are those of individual analysts, experts, and brokerage firms, and not the publisher of this article.

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