Short build-up in banking, media and chemical stocks

Next week is expected to be volatile and event heavy amid multiple results and the interim budget on February 1 (Thursday). However, over the medium term, analysts expect flows to pick up gradually, given the inflation stability and expected political steadiness post elections. FIIs continue to be sellers in the market this week. Buying and selling by FIIs and DIIs on alternate bouts resulted in volatility these days and it may remain high in the near-term. This volatility may be used by investors to churn their portfolios.

“In sectors specific, there is a noticeable short build-up in banking, media, and chemical industries. Conversely, a long build-up is observed in cement, telecom, and infrastructure sectors. Upon closer look of individual stocks, strong long build-ups are evident in Industower, Bhartiartl, and TataConsum, while short build-ups are observed in Zeel, Polycab, and Pvrinox. Notable short-covering were witnessed in Gujgasltd, Apollotyre, and Hindpetro, whereas long unwinding was noted in Suntv, IEX, and Indiamart. Looking ahead to the upcoming week, crucial support levels for Nifty are anticipated at 21,200 and 21,000, while 21,800 is expected to act as a resistance,” Dhirender Singh Bisht, SMC Global Securities Ltd, told Bizz Buzz.

“During the last week, the market experienced a notable correction, with some sectors facing significant downturns. Following the termination of the Zee deal with Sony, Zee saw a sharp decline of over 30 per cent in a single day. The nearing deadline for additional disclosures by Foreign Portfolio Investors emerged as a factor contributing to the market’s downturn, alongside other factors. Disappointing results from HDFC Bank further added to the market’s concerns,” remarked Bisht.

It’s estimated that the domestic and FPI volumes may remain tepid during truncated week, as most long only investors to stay defensive and wait for clear trading trends to emerge in the last week of January.

“Nifty forms bearish candle, losses to deepen on slip below 21,300, if the index breaks the 21,300-mark in the coming sessions, the correction can deepen to 20,850 points. On the higher side, 21,400-21,500 may act as a hurdle.

The weakness in the banking sector persists, as indicated by mixed numbers reported by major private sector banks such as HDFC Bank and Axis, both continuing a downward trend.

On Thursday, Tech Mahindra experienced a more than five percent plunge in its stock value attributed to weak quarterly results. Additionally, Axis Bank and Sun Pharma recorded a decline of over two percent.

A notable market anomaly is the disparity in valuations, with some sectors displaying high valuations while others, like certain PSU stocks, rely on optimistic expectations tied to order flows. The realization of profits from these order flows, such as in shipbuilding, is expected to take a considerable amount of time, and success is not guaranteed. Conversely, sectors like banking are deemed to be fairly valued with positive performance and prospects. Notably, blue-chip stocks like HDFC Bank are considered to hold value.

Concerns arise from the increase in bond yields in the United States. The previous rally in global stock markets was initiated by the Federal Reserve's pivot, leading to a drop in the 10-year bond yield from 5 percent to approximately 3.8 percent. The current rebound in the 10-year yield to 4.18 percent suggests that a Federal Reserve rate cut might not occur until the second half of 2024. A significant takeaway from Q3 results is the improvement in margins within the auto industry.