January 2 Trade Outlook: Nifty eyes 23,800 breakout on expiry

The Nifty50's recent rally is encountering resistance around the 23,900-24,000 range. A decisive move above 24,000 could pave the way for a further rise towards 24,500.

The market kicked off the new calendar year on a positive note, extending morning gains to close nearly half a percent higher on January 1, 2025. After an early dip, buying interest in select heavyweight stocks across various sectors quickly erased losses, pushing the index higher. However, a significant challenge remains as the index stays below the critical 200-day moving average (200DMA).

Top Performers

Auto and energy sectors led the recovery, with HDFC Bank, Larsen & Toubro, Reliance Industries, and Mahindra & Mahindra (M&M) being the largest contributors to Nifty's gains. Maruti Suzuki and M&M topped the list of Nifty gainers, driven by strong monthly sales data.

Sectoral and Broader Indices Performance

Most sectors participated in the recovery, with broader indices recording gains between 0.4% and 1.05%. Key performers included:

Maruti Suzuki India: ₹11,208.30 (+₹349.90, +3.22%)

Mahindra and Mahindra: ₹3,082.00 (+₹74.90, +2.49%)

Larsen & Toubro: ₹3,667.50 (+₹59.85, +1.66%)

Bajaj Finance: ₹6,935.30 (+₹112.30, +1.65%)

Eicher Motors: ₹4,885.30 (+₹63.40, +1.31%)

Noteworthy Developments

Shares of Easy Trip Planners ended in the red after Nishant Pitti, one of the co-promoters, resigned as CEO effective January 1, 2025, citing personal reasons. Pitti, who has been on the board since 2008, announced plans to sell his remaining 14% stake via block deals but managed to sell only 1.4% of his stake.

Market Sentiment

Rahul Sharma, Director and Head of Technical & Derivative Research at JM Financial Services, noted that the markets began the new year positively, with the Sensex rising over 400 points and the Nifty over 100 points in the first half of the trading session. He highlighted that the ratio chart of Nifty 500 vs S&P500 indicates a bottoming-out setup, suggesting India may outperform the US markets in early January.

Vinod Nair of Geojit Financial Services mentioned that the sustainability of the positive trend will depend on earnings growth in Q3, with expectations being positive on a QoQ basis. Factors such as an uptick in core sector data and potential government capex spending are aiding sectors like capital goods, industrials, auto, and power.

Seasonality Factor

Historically, January has been a challenging month for Nifty, with the past six years showing negative returns ranging from 0.3% to 2.5%.

Key Triggers Ahead

December auto sales figures

PMI data

Quarterly business updates from banks and companies

Upcoming Federal Reserve meeting later in January

Union Budget on February 1

Institutional Activity

Foreign institutions remained net sellers in the cash market on Wednesday, while domestic institutions were net buyers.

Technical Outlook

Rupak De of LKP Securities noted that the Nifty index maintained a positive bias despite volatility, rising for the second consecutive session. He expects the rally to face resistance around 23,900-24,000, with a potential extension towards 24,500 if it moves decisively above 24,000. On the downside, support is seen at 23,550.

Stocks to Watch Ahead of Thursday's Trading Session

Tata Motors: December auto sales showed a 1% rise in total domestic sales at 76,599 units YoY. CV sales were down 1%, while PV sales (including EV) rose 1%.

Indian Bank: Shanti Lal Jain ceased to be the MD and CEO effective January 1, 2025, due to superannuation.

NMDC: December business update showed a 5.1% increase in iron ore production YoY, while sales fell 6.7%.

As Nifty50 navigates its way through these key levels, market participants will be closely monitoring economic data, earnings reports, and institutional activity to gauge the direction of the market.