Nifty Faces Bearish Setback: Is the Rally Over? Key Market Drivers and What’s Ahead 📉

NiftyTrader • January 3, 2025

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Index	Price	Change	% Chg
Nifty 50	24,004.75	-183.90	-0.76%
Nifty MidCap 50	16,181.60	-60.35	-0.37%
Nifty SmallCap 50	9,012.75	-52.45	-0.58%
Nifty Bank	50,988.80	-616.75	-1.20%
Nifty Financial	23,735.70	-271.00	-1.13%
BSE SENSEX	79,223.11	–720.60	–0.90%

At the close, the Nifty 50 was at 24,004.75 down by 0.76%

The Nifty’s performance on January 3, 2025 was a rollercoaster ride for investors. After strong gains in the initial days of the year, the bears took charge, sending the index almost below 24,000, marking a 0.76% decline to close at 24,004.75. But what caused this sudden shift, and what lies ahead for the market?

Profit Booking After Strong Gains: The Bearish Candle Pattern 🔴

A long bear candle formed on the Nifty’s daily chart, right beside the long bull candle of Thursday, signaling a potential profit booking after the market’s stellar rise. The Nifty is now hovering near the support level of 23,900, which is significant because it’s both halfway to the bull candle from Thursday and a crucial support zone as per change in polarity.

Key Points:

Nifty drops by 0.76% to close at 24,004.75.
Bearish candle pattern indicates profit booking after Thursday’s gains.
Support at 23,900, near key levels of previous bullish momentum.

Technical Analysis: A Critical Point for Nifty 📊

The 50 EMA (Exponential Moving Average) on the daily timeframe acted as a resistance, preventing Nifty from breaking higher and leading to a correction. Yet, there’s still hope for an upward move—if the index can maintain levels above 24,000 and break 24,220, we could see Nifty testing 24,500.

But if 24,000 is breached decisively, Nifty may slide further toward 23,700. The RSI shows a bullish crossover, hinting at potential bullish momentum if Nifty clears the next resistance.

Key Points:

50 EMA acted as resistance, triggering the pullback.
Bullish crossover in RSI signals possible upside, with targets of 24,500.
Critical support at 24,000; a break could lead to further downside to 23,700.

Sectoral Breakdown: IT, Pharma Drag Nifty Down, Media and Oil Show Strength 🛢️📺

Despite the broad market decline, certain sectors provided a glimmer of hope. Media and oil & gas stocks performed well, limiting losses, while IT, pharma, and banking sectors pulled the market down. The energy and FMCG sectors closed in the green, suggesting that the pullback could be a short-term pause after the recent rally.

Key Points:

IT and pharma stocks dragged down the market, while media and oil saw gains.
FMCG and energy sectors ended positive, providing support.

External Factors Impacting Sentiment: Crude Prices and US Economic Outlook 🌍💵

Several external factors contributed to the market’s weakness today. The surge in crude oil prices—with Brent crude futures rising 1.7% to $75.93 per barrel—added inflationary pressure on oil-importing nations like India, dampening sentiment. Additionally, US interest rate outlooks and a stronger dollar weighed on emerging markets like India, causing further caution in investor sentiment.

The US labor market data and strong Treasury yields reduced expectations for aggressive rate cuts by the Federal Reserve, which impacted foreign institutional inflows, particularly hurting IT stocks.

Key Points:

Crude oil price rise pressures inflation and weakens sentiment.
US rate hike expectations discourage FII inflows, especially affecting IT stocks.
Stronger dollar and higher Treasury yields add pressure.

India Inc. Strengthened by Record Cash Reserves: What’s Next? 💰

Despite the market’s pullback, India Inc. enters 2025 with a solid balance sheet, boasting cash reserves of Rs 7.6 lakh crore, up 51% since the pre-COVID period. This positions Indian companies strongly amid the global economic headwinds, and many are gearing up for strategic investments, which could fuel growth despite external pressures.

Key Points:

India Inc. holds Rs 7.6 lakh crore in cash reserves, up 51% from pre-COVID.
Strategic investments and consolidation could drive growth.

Looking Ahead: Budget 2025 and Global Trade Challenges 📅💡

India’s trade relations with the US are set for further tension, as President Trump has called India a “very big abuser” of tariffs. This presents both challenges and opportunities, especially if Trump implements higher tariffs on Chinese imports, potentially creating new avenues for Indian exports.

Additionally, Budget 2025 expectations are high, with calls for tax incentives for fixed deposits and long-term savings. With global economic uncertainty and domestic policy changes, strategic stock positioning in sectors like FMCG, energy, and auto could prove beneficial.

Key Points:

India-US trade tensions pose challenges and opportunities.
Expect tax incentives in Budget 2025, potentially boosting savings and capital markets.

Conclusion: Navigating the Market Maze 🔍

In conclusion, while Nifty’s recent decline reflects market caution, there are several opportunities in select sectors and stocks. The focus should now shift to strategic positioning, with energy, auto, and FMCG sectors looking poised for outperformance in the near term. Keep an eye on global economic conditions and technical levels, as they will likely guide the market’s next big move.

Bank Nifty: Down by 1.20%

The Bank Nifty opened in the red and continued its decline throughout the session, closing with a 1.20% loss at 50,988.80. The broader market weakness, particularly in banking stocks, weighed heavily on the index, highlighting the vulnerability of the sector in the face of global economic uncertainties and domestic concerns. The BSE Sensex also felt the pressure, dropping by 0.90% to close at 79,223.11.

In the sectorial front, the Media sector skyrocketed by 1.70%, making waves across the market. But it wasn’t just the sector’s overall performance that turned heads; some individual stocks shot up in a way no one saw coming. Saregama India Ltd., a well-known name in the entertainment industry, soared by an impressive 11.36%, while Tips Music Ltd. followed closely with a healthy 4.36% gain.

On the flip side, the IT sector found itself grappling with a 1.41% decline, as major players experienced noticeable losses. Among the hardest-hit stocks, Wipro Ltd. took a hit of -2.83%, while Tech Mahindra Ltd. followed suit with a loss of -2.11%.

Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) continued to sell, with a buy value of ₹10,812.78 crore and a sale value of ₹15,040.03 crore, resulting in a net outflow of ₹4,227.25 crore.

Domestic Institutional Investors (DIIs) remained net buyers, recording a buy value of ₹14,332.69 crore against a sale value of ₹13,512.09 crore, contributing a net inflow of ₹820.60 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included IDFC First Bank with a 1.27% increase, Punjab National Bank with a 1.00% increase, AU Bank with a 0.53% increase, IndusInd Bank with a 0.47% increase, and Bank of Baroda with a 0.25% increase.

On the other hand, the biggest losers in the sector included HDFC Bank with a 2.53% decline, ICICI Bank with a 1.94% decline, State Bank of India with a 0.99% decline, Federal Bank with a 0.54% decline, and Axis Bank with a 0.50% decline. These results suggest that some of the banking stocks performed better for the day.

Gold and Silver Rate (INR) 3rd January, 2025

22 K Gold / g	₹ 7,260	+ ₹80
24 K Gold / g	₹ 7,920	+ ₹87
18 K Gold / g	₹ 5,940	+ ₹65

Silver / g	₹ 92.50	+₹2
Silver / kg	₹ 92,500	+₹2,000

Stocks Highlights

Oil & Natural Gas Corporation Ltd. saw a 5.11% increase in its share price, closing at Rs 258.65, up from Rs 246.07. This surge may feel like a sudden spike, but it’s backed by impressive figures. Historically, in the last 20 years, only 1.33% of sessions saw intraday gains higher than 5%. So, is this a sign of something bigger brewing for ONGC?

The company’s Return on Equity (ROE) is also worth noting – it delivered a 14.6% ROE in the year ending March 31, 2024, outperforming its 5-year average of 12.06%. Stronger-than-expected returns could signal that the company is finally on the right track.

However, there is a caveat—ONGC’s sales have de-grew by 5.74%, marking its first revenue contraction in three years. But don’t let that deter you just yet. The 20-day moving average crossover appeared yesterday, and if history is any guide, stocks following this signal have seen an average price gain of 3.35% within the next 7 days over the last 5 years.

Key Points:

ONGC stock up by 5.11%, closing at Rs 258.65.
ROE of 14.6%, surpassing the 5-year average of 12.06%.
Sales contraction of 5.74% signals challenges, but buy signals suggest optimism.
20-day moving average crossover points to potential for 3.35% price gain within a week.

Wipro Ltd. saw a 2.83% drop in its stock price, closing at Rs 295.20, down from Rs 303.80. Is this just a temporary setback or a sign of deeper issues within the company?

Looking at the intraday data, only 1.31% of sessions over the last 20 years have seen intraday gains greater than 5%, further indicating the difficulty in turning the tide for Wipro in the short term. Its topline contraction of 0.39% marks its first revenue drop in 3 years—a worrying sign for investors.

Even more concerning is Wipro’s stock performance over the past 3 years, with a return of -15.06%, far behind the 39.6% return of the Nifty 100. Additionally, the company’s expenses are skewed, with 61.2% of operating revenues spent on employee costs, and 1.4% on interest expenses—a combination that could signal inefficiencies that are hurting overall profitability.

Key Points:

Wipro stock drops by 2.83%, closing at Rs 295.20.
Sales contraction of 0.39% for the first time in 3 years.
Stock performance lags with a 3-year return of -15.06% versus Nifty’s 39.6%.
High employee cost (61.2%) and interest expenses (1.4%) put strain on profitability.

Advance Decline Ratio

Today, the advance-decline ratio was 1.07 and the market breadth was positive. The volatility index India Vix decreased by 1.43 to settle at 13.54 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 1449
Decliners – 1360
52Wk High – 88
52Wk Low – 15
High Band Hitters – 139
Low Band Hitters – 35
200d SMA – 23897
50d SMA – 24132
20d SMA – 24144

Top Gainers and Losers Stocks

The top gainers were ONGC (+5.11%), Tata Motors (+3.13%), SBI Life (+1.95%), Titan (+1.80%), and Nestle India (+1.40%).

The top losers were Wipro (-2.83%), HDFC Bank (-2.53%), Adani Ports (-2.30%), Tech Mahindra (-2.11%), and Cipla (-1.98%).

Top Gainers and Losers Sectors

The top gainers sector were Media (+1.70%), Oil & Gas (+1.26%), Consumer Durables (+0.69%), FMCG (+0.25%), and Metal (+0.08%).

The top losers sectors were IT (-1.41%), Pharma (-1.23%), Financial Services (-1.13%), Realty (-0.62%), and Auto (-0.05%).

SECTORS – NOTABLE ACTION
MEDIA +1.70%
OIL & GAS +1.26%
CONSUMER DURABLES +0.69%
IT -1.41%
PHARMA -1.23%
FINANCIAL SERVICES -1.13%

Stocks Ban List

(SEBI) F&O ban list (RBLBANK close at +162.79), and (MANAPPURAM close at -187.72) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

HINDCOPPER, and LTF stocks has the possibilities of entrants in the ban list.