Trade Setup for January 20: Nifty faces pressure ahead of HDFC Bank results and Trump's inauguration

After a brief uptick, the Nifty 50 index fell into weakness on Friday, closing at 23,203, a 109-point decline. This came after a three-day rally and was influenced by persistent foreign institutional investor (FII) outflows, mixed Q3 earnings, and global uncertainty surrounding Donald Trump’s presidential inauguration. The index opened with a gap down and faced additional pressure as key IT and banking stocks underperformed, with Infosys and Axis Bank leading the declines.

Despite the weak overall sentiment, Nifty heavyweight Reliance Industries posted strong Q3 results, buoyed by growth in its retail and oil-to-chemicals sectors, which supported the broader market. Reliance’s performance, driven by domestic demand and operational efficiencies, helped mitigate the impact of falling IT stocks.

Infosys, a major drag on the index, saw its shares tumble 6% following disappointing quarterly results. While the company revised its revenue growth forecast upwards, it warned of wage hikes that may impact margins in the upcoming quarters, shaking investor confidence.

Over the past two weeks, the market has faced its second consecutive weekly loss, falling more than 3%. The Nifty IT index was the hardest hit, dropping 6%, its steepest weekly decline in almost a year. Meanwhile, stocks like HCLTech, Infosys, and Wipro were among the top losers, while Hindalco, NTPC, HDFC Life, Coal India, and Reliance Industries showed resilience, leading the gainers.

Looking ahead, domestic equities are likely to remain volatile as earnings season continues. Investors will closely monitor Q3 results and management commentary in the coming days. The inauguration of Donald Trump as the 47th U.S. president on January 20, along with his policy announcements, is expected to influence global market sentiment.

The upcoming earnings from Kotak Mahindra Bank, Zomato, Paytm, Dixon Technologies, and Oberoi Realty are likely to impact market dynamics. Additionally, the listing of Laxmi Dental shares on the BSE and NSE, following its oversubscribed IPO, could provide a boost, with the stock commanding a grey market premium suggesting a 33% listing gain.

Nifty 50 Chart Outlook

The Nifty index remains under bearish pressure, having encountered resistance at a critical moving average level. Analysts suggest that if the index stays below 23,400, the bearish sentiment could persist in the short term. A move below 23,000 could trigger a deeper market correction, while 23,400 remains a key resistance level. Immediate support is placed at 23,100, with a potential recovery above 23,400 signaling a shift towards a bullish trend.

Nifty Bank Chart Outlook

The Nifty Bank index closed at 48,540.60, down 1.50%. On the daily chart, the index formed an Evening Star pattern, which could signal a reversal in the near term. A weekly Gravestone Doji formation points to overall bearish sentiment. The key resistance level for the Bank Nifty is 49,500, and unless it decisively crosses this mark, any upward movement is expected to remain muted. On the downside, the swing low of 47,898 remains a crucial support level.

For Bank Nifty, the trend is likely to remain weak as long as it stays below 49,200. A breakout above this level could target 49,800-50,000, with analysts closely watching these key levels.

Stocks to Watch:

Kotak Mahindra Bank: Q3 net profit of ₹3,304.8 crore, slightly ahead of estimates. NII stood at ₹7,196.3 crore.

RBL Bank: Net profit of ₹32.6 crore, below expectations. Provisions stood at ₹1,188.9 crore, a significant rise from the previous quarter.

Jio Financial Services: Reported a slight increase in net profit, up 0.3% to ₹294.8 crore.

Dixon Technologies: Signed an MoU with KHY Electronics for a ₹133 crore land and asset acquisition.

IndusInd Bank: CFO Gobind Jain resigned, with Arun Khurana stepping in as the new CFO from January 21.

Gland Pharma: The USFDA issued an EIR for its Pashamylaram facility, marking the conclusion of the inspection.

Hitachi Energy: Plans to raise ₹4,200 crore through a QIP offering.

Zydus Lifesciences: Received USFDA approval to conduct phase II(b) clinical trials for Usnoflast.

Ashapura Minechem: Signed an MoU with China Railway to develop its Fako Bauxite deposit in Guinea.

The market remains volatile, with both domestic and international factors influencing investor sentiment. Stock-specific movements, earnings results, and geopolitical events, including Trump's inauguration, will dominate market action in the near term. Investors should stay cautious, closely tracking the key levels in the Nifty and Bank Nifty indexes while watching for further corporate earnings reports and global developments.