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Informist, Tuesday, Jan. 14, 2025

By Anshul Choudhary

MUMBAI – The benchmark indices may rise further Wednesday owing to the oversold conditions on the technical charts, but gains are likely to be capped on account of concerns regarding the December quarter corporate results, the interest rate trajectory in the US and India, and outflows by foreign portfolio investors. Some analysts said it would be difficult for the indices, especially those tracking mid-caps and small-caps, to hold on to any gains due to the high valuations.

The indices closed slightly higher Tuesday after having declined for four successive sessions. The Nifty 50 rose to an intraday high of 23264.95 points, but came off the high to close at 23176.05 points, up 0.4%. The Sensex closed 0.2% higher at 76499.63 points.

Tuesday's gains are not being seen as a sign of reversal in the sentiment. "The rebound was largely driven by oversold conditions, which often trigger such recoveries. However, participants should view this as an opportunity to trim positions during further recovery, particularly in the midcap and smallcap segments," Ajit Mishra, senior vice-president of research, who covers technical analysis at Religare Broking, said in a note.

Technical analysts expect the indices to see some more gains due to the oversold conditions. They expect the Nifty 50 to face resistance around 23400 points, while 23100 points may act as a support level. Analysts said the markets may fall to 22700-22900 points in the near term if selling pressure persists.

Slowdown in earnings growth is turning out to be a major risk at a time when several stocks are still trading at peak valuations despite some correction in the overall market. Several analysts said the correction so far is not enough for valuations to become attractive once more. The Nifty 50, Nifty Midcap 150, and Nifty Smallcap 250 have fallen around 12% each from their respective lifetime highs, touched last year.

"From the market standpoint, the downside surprises in both corporate earnings and economic growth outcomes and elevated PEG (price/earnings-to-growth) ratio will have a significant bearing on portfolio performance. Also, as further earnings downgrades are expected, valuations are also expected to correct, thereby leading to a sluggish year-end market performance," Systematix Institutional Equities said in a note.

Nifty 50 constituent HDFC Life Insurance Co. Ltd. will report its results for the December quarter Wednesday. Broking firms Motilal Oswal Financial Services and Sharekhan expect the insurer's net profit at INR 4.3 billion-INR 4.5 billion, indicating a rise of 19-23% on year.  End

Edited by Rajeev Pai

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