Trade Setup for January 7: Nifty faces weakness after ₹10 lakh crore loss: Market unpredictable
Trade Setup for January 7: Nifty faces weakness after ₹10 lakh crore loss: What's next?
The Nifty 50 index opened positively but quickly lost momentum, closing near its intraday lows after experiencing sharp weakness in the latter part of the session. The index dropped by 388 points, continuing a two-day decline of over 550 points. This marked the steepest one-day fall since October 3, 2024, in percentage terms.
Today's market saw a major decline in the market capitalization of all BSE-listed stocks, with a ₹10 lakh crore washout. Banks were hit hard, with Union Bank shedding nearly 8% following quarterly updates. The slide was exacerbated by a stronger US dollar and ongoing foreign portfolio investor (FPI) selling, which created a challenging environment for emerging markets.
ITC Ltd. saw an 8% drop, driven by the company's decision to spin off its hotel business into a separate entity. Shares of ITC closed at ₹445.35, signaling a 2.25% decline from the previous session's close.
Analysts are expecting continued volatility in the market, citing factors such as the new virus concerns, quarterly business updates, and the upcoming Q3 earnings season. CA Jashan Arora, Director at Master Trust Group, highlighted that market volatility could persist due to earnings, the budget, and international trade policy. Foreign institutional investors were net sellers at ₹2,575.06 crore, while domestic institutional investors (DIIs) were net buyers at ₹5,749.65 crore.
What the Nifty Charts Show
The short-term trend of the Nifty remains weak, according to Nagaraj Shetti of HDFC Securities, with further weakness expected. Immediate support levels are seen around 23,460 and 23,260. Any potential upside could face resistance near 23,800.
Om Mehra from SAMCO Securities noted that the Nifty has slipped below key moving averages, signaling bearish momentum. If the support at 23,460 is breached, a sharper correction toward 23,300-23,200 could follow. He warned that any short-term pullback could be risky unless the Nifty closes decisively above 24,000.
Vinay Rajani of HDFC Securities pointed out that the Nifty's decline of over 675 points from its recent high has negated bullish signals. The index's trend has now turned bearish, with immediate support levels seen at 23,460 and 23,260, and resistance at 23,800 and 24,090.
Nifty Bank Outlook
The Nifty Bank index also closed sharply lower, dropping 2.09% to 49,922. The index continues to show a series of lower highs and lower lows, reinforcing the bearish sentiment. A critical support level at 49,530, which has held for the past six months, is now at risk. A decisive breach of this support could lead to further declines.
The index has fallen below all key moving averages, with the daily RSI below 40, signaling weak momentum. Mehra cautioned that short-term pullback trades carry higher risk, as the prevailing trend lacks conviction. A close above 51,000 is necessary to restore confidence and signal a potential recovery.
Stocks to Watch
Coal India: Signs non-binding MoU with IREL (India) to collaborate on mining, extraction, and refining.
Bharti Airtel: Signs share purchase agreement with iBus Network and Infra for the transfer of its 50% stake in Firefly Networks.
Bandhan Bank: Manoj Kumar Mauni resigns as Chief Technology Officer, effective January 6, 2025.
Power Grid: Declared successful bidder for two projects to establish an interstate transmission system under BOOT basis.
