Below the Daily Market Commentary By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd
“Indian equity markets extended its fall for second straight day amidst weak global cues and profit booking. Nifty plunged 152 points (-1.1%) to end at 14,281, while Sensex fell 470 points (-1.0%) to end at 48,564. The broader market fell more sharply with both Nifty Midcap 100/Nifty Smallcap 100 down -2.1%/-1.8% respectively. All the sectors ended in red with Metals being the biggest loser, down -4.1%, on account of profit booking. It was followed by Auto, Media, Pharma, PSU Banks and Realty which fell more than 2%. Financials, Private Banks, IT and Infra lost 1-2% each.
Global cues were weak as soaring Covid-19 cases offset investor hopes of a quick economic recovery, while the Chinese economy posted a better-than-expected rebound in the fourth quarter of 2020. On the domestic side, Nifty continued with its profit booking; however Reliance Industries and HDFC Bank capped the Nifty losses. All five of the Nifty 50 companies that announced results so far have beaten estimates. HDFC Bank was among the top gainers, after it reported strong loan growth and a drop in bad loans for its December-ending quarter.
Technically, Nifty formed a Bearish candle on daily scale and started to form lower tops and lower bottoms from the last two sessions. Now till it remains below 14350, weakness could be seen towards 14200-14000.
India VIX was up by 1.6% to 24.4 levels. Volatility has spiked above 24 which is causing some pause in the positive momentum and needs to cool down below 20 zones.
Going ahead, market would be volatile given the ongoing earning season and the weak global cues. Run-up to the Budget expectations would also add to the volatility. The valuations too are stretched as the Nifty is trading at 22xone-year forward P/E compared to its Long term average of 19x. We would advise investors to take the opportunity to accumulate quality stocks on dips. Traders on the other hand should book profits intermittently and be stock selective.”