Weekly Market Wrap: Weak banking stocks drag the D-street down amid tensions in the Middle East. What lies ahead?

Indian equity benchmarks ended the extended trading week in red terrain as traders opted to book profit at all-time high levels amid tensions in the Middle East and dimming rate cut hopes by the US Fed.   

The Consumer Price Index (CPI)-based retail inflation rose to 5.69 per cent year-on-year (Y-o-Y) in December from 5.55 per cent in November. Meanwhile, wholesale price index (WPI) surged to a nine-month high of 0.73 percent in December 2023 as against 0.26 percent in November 2023.  

Selling pressure also increased with the commerce department stating that growing attacks on commercial shipping vessels travelling through the lower Red Sea have resulted in a combined impact of higher freight costs, insurance premiums and longer transit times. Besides the hectic selling in banking sector post HDFC Bank’s Q3 numbers too aided to the fall.

These signals led the BSE Sensex to decline 1145 points, or 1.58 per cent, at 71423.65 during the week ended on January 20, 2024. While the Nifty slipped 323 points, or 1.47 per cent, to 21571.8.  

Sector-wise, the BSE Oil & Gas index surged the most (4.3 per cent) during the week gone by. While BSE Capital Goods and BSE Teck indices have registered a gain of 1.6 per cent, and 1.1 per cent, respectively. On the other hand, the BSE Bankex index fall 2.9 per cent. 

As many as 23 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a weekly gain of 8.3 per cent, Oil & Natural Gas Corporation (ONGC) emerged as the top gainer in the index. It was followed by Tech Mahindra (6 per cent), Apollo Hospitals Enterprise (5.7 per cent), Bharat Petroleum Corporation (5.4 per cent), Coal India (4.7 per cent) and Bharti Airtel (4.4 per cent). Wipro, Shree Cement and Infosys, also advanced by over two per cent. On the other hand, HDFC Bank, IndusInd Bank, and Divi's Laboratories declined 9.8 per cent, 8.3 per cent, and 6 per cent, respectively.                

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Market outlook: Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities said, the benchmark indices ended lower in the volatile session on January 20 with Nifty around 21,600. International cues were positive at the start of the day. 

US stocks finished higher on Friday, with the S&P 500 closing at a fresh record high for the first time in more than two years. Technology was the best-performing sector in the S&P 500 index on Friday, with a gain of more than 2 per cent. 

Vakil further said Nifty ended the extended week with a fall of 1.47 per cent to close at 21571.80. In the absence of FII’s, volumes remained relatively lower on the last trading day. Nifty Midcap 100 and Small-cap 100 Indices outperformed the Nifty. Nifty Midcap and Small-cap 100 Index gained 0.56 per cent and 0.21 per cent respectively. Nifty Midcap 100 Index managed to close at fresh all-time highs. As breadth of the Market remained strong for the second day on the trot, we expect stock specific bullish trend is likely to continue.  

It will be a trading holiday on Monday, 22 January 2024, with the Maharashtra government announcing a holiday for the consecration of the Ram Temple in Ayodhya. “Nifty has formed bearish engulfing pattern on the weekly as well as on daily charts, which usually indicates bearish trend reversal. It would be advisable to stay cautious unless Nifty surpass the resistance of 21850. Supports for the Nifty are seen at 21500 and 21285," Vakil said. 

Bank Nifty             

Kunal Shah, Senior Technical & Derivative Analyst, at LKP Securities said, The Bank Nifty index displayed resilience by forming a higher low on the daily chart while maintaining the immediate support zone of 45700-45600. “To resume the uptrend, the index needs to overcome the immediate resistance at 46300, a breakthrough that could trigger short-covering, propelling it towards 46500/46800 levels. However, a close below the crucial support of 45600 might instigate a substantial downside correction towards 44000” Shah said.    

Also Read: Bank Nifty next week: Potential for movement towards resistance at 47,000