Bears rule 1st week of 2023: Sensex below 60k, Nifty near 17,850 ahead of tech earnings

Selloffs in equities escalated after FOMC minutes, while foreign investors who have been net sellers throughout the week had kept market sensitive. Also, the Indian rupee weakened due to broad-based selling pressure in domestic equities and an upside in the greenback.

Sensex ended at 59,900.37 lower by 452.90 points or 0.75% after touching the day’s low of 59,669.91. Nifty 50 closed at 17,859.45 down by 132.70 points or 0.74% after hitting an intraday low of 17,795.55.

In the broader market, midcap and smallcap indices plunged by nearly a percent. In terms of sectoral indices, IT stocks were worst hit down by nearly 2% each on BSE and NSE. Metal and banking stocks also dipped around 1%. Bank Nifty shed nearly 420 points.

TCS was the top bear tumbling by nearly 3% ahead of its Q3 earnings on January 9th. IndusInd Bank, Bajaj Finserv, Tech Mahindra, Bajaj Finance, Infosys, Kotak Bank, and Bharti Airtel also dragged the performance with a downside of 1.5% to 3%.

Stocks like M&M, RIL, Nestle, and ITC were top gainers but the upside was between 0.5-1%.

Ajit Mishra, VP – of Technical Research, at Religare Broking, said, “Markets extended decline and lost nearly a percent, tracking weak global cues. After the initial uptick, Nifty traded under pressure for most of the session and almost retested the last month’s low. It witnessed a marginal rebound in the end and finally settled at 17859 levels. The majority of sectoral indices traded in sync with the benchmark and ended lower wherein IT and banking were among the top losers. The broader indices too witnessed a decline and lost in the range of nearly a percent each.”

According to Milind Muchhala, Executive Director, Julius Baer India, the Indian equity markets have begun the new year on a slightly cautious note, in line with the global markets, continuing the trend visible in December 2022.

At the interbank forex market, the rupee depreciated against the US dollar to end at 82.72 compared to the previous day’s closing of 82.55 per dollar. The local unit was under pressure after the greenback climbed to a near one-month high after strong US data that stirred up expectations of a further hawkish approach by the US Fed in their monetary policy. Overall, rupee closed the week on a broadly unchanged note against the American currency. 

Meanwhile, FIIs have been net sellers the entire week. From January 2nd to 5th, FIIs have pulled out ₹4,910.98 crore from Indian equities.

From January 4th to 6th, both Indian benchmarks dipped by nearly 2% each. Sensex has declined by nearly 1,394 points in this 3-day losing streak, while Nifty 50 corrected by over 373 points. Markets were in the green from January 2nd to 3rd, however, FOMC minutes and cautious bets ahead of Q3 earnings led to Sensex and Nifty 50 giving up their gains and entering the red zone.

Going ahead, Mishra said, weak global cues are largely weighing on sentiment in absence of any major trigger from the domestic front. We may see some breather in the Nifty index after the recent slide but the tone is likely to remain negative, citing the weak structure of several index heavyweights. Participants should align their positions accordingly while keeping a check on leveraged trades.

On Nifty 50, Rupak De, Senior Technical Analyst at LKP Securities said, bears continue to have the upper hand as the benchmark index Nifty has been posting red candles for the last three days. The Nifty found support around the previous swing low on the daily timeframe. The momentum indicator RSI (14) is in a bearish crossover, suggesting weak price momentum for the near term. Going forward, 17,770 is likely to act as support for the falling Nifty; a decisive fall below the said level may take the index towards 17,500. On the higher end, resistance is visible at 18,000, above which a recovery may come.

Market participants have shown nervousness ahead of the December 2022 quarter season. TCS will kick start the Q3FY23 earnings season next week by announcing its financial results for the quarter on January 9th. Peers like Infosys and HCL Tech are also lined up to announce their Q3 on January 12th followed by Wipro on January 13. The largest banker in terms of market share and largest private banker, HDFC Bank will also be announcing its Q3 results on January 14. Others will follow suit going ahead.

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