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Informist, Friday, Jan. 10, 2025

By Anshul Choudhary

MUMBAI – Even the flicker of a hope of a bounce-back in the benchmark indices is gone after the Nifty 50 closed below its key support level of 23500 points Friday. Analysts expect the index to fall further next week, with some saying the index could test the level of 23300-23000 points.

"The market remains under strain, with even minor pullbacks attracting selling pressure. In the absence of any clear signs of a trend reversal, particularly in the banking index, traders are advised to use rebounds as shorting opportunities," Ajit Mishra, senior vice-president of research at Religare Broking, said in a note.

On Friday, the Nifty 50 closed at 23431.50 points, its lowest closing level since Nov. 21. The index has lost 2.4% this week and is down nearly 11% from the lifetime high it touched in September.

Analysts are worried that the market consensus for the December quarter earnings might be too optimistic and downgrades are a major possibility as the earnings season unfolds. A poll of 22 brokerages by Informist suggests that the net profit of Nifty 50 companies is expected to rise 10% in Oct-Dec, but several other analysts have said this is not viable considering slower-than-expected capital expenditure. JM Financial Institutional Securities in a report Friday said the earnings of Nifty 50 companies may grow by only 5.8% during the December quarter.

The continuous outflows by foreign institutional investors have also helped to keep the indices down and prevented a recovery despite strong buying by domestic investors. FIIs net sold equities worth INR 71.71 billion on Thursday. With this, they have net sold equities worth nearly INR 152 billion this month till Thursday.

Analysts are not hopeful foreign investors will turn net buyers any time soon, given the uncertainty around US president-elect Donald Trump's policies once he takes charge on Jan. 20. "We believe Trump's plans for lower corporate taxes, higher import tariffs, and deportation of illegal immigrants will result in growth in the US economy, higher inflation, higher interest rates, and a stronger US dollar... This is tempting FIIs to take at least some portion of their money back to the US," JM Financial said in its report.

Banking stocks have been a major drag on the index with the Nifty Bank declining over 4% this week alone. Technical analysts expect some gains in bank stocks next week after this weakness, but concerns around slowing credit growth may limit any gains.  End

US$1 = INR 85.96

Edited by Rajeev Pai

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