The Indian stock market exhibited a strong performance on January 29, with substantial buying activity that led to notable gains in major indices such as the Nifty 50 and the Sensex, both of which increased by nearly 2%. This surge was influenced by positive global market trends.
Investors are currently navigating through significant market fluctuations due to the anticipation of the Interim Budget for 2024. The volatility index, India VIX, saw a 13% rise on the same day. Additionally, there is heightened attention on the forthcoming US Federal Reserve policy decision and Chairman Jerome Powell’s remarks, scheduled for January 31.
Despite these imminent events, experts believe that neither the Budget presentation nor the US Fed meeting will significantly sway market sentiments. The upcoming Budget, to be presented on February 1, is expected to be a Vote on Account, given the impending General Elections in 2024. This format typically does not include substantial policy changes. Economists and market analysts predict that the government will maintain its course towards fiscal consolidation and continue prioritizing infrastructure and manufacturing sectors.
Regarding the US Federal Reserve, a pause in interest rate adjustments is anticipated. While a rate decrease is not expected at this meeting, there is optimism that Chairman Powell’s comments might lean towards a dovish stance, considering the recent easing of inflation in the US.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked that both the interim Budget and the Fed’s rate decision are unlikely to have a major impact on the markets. He emphasized that the Budget will mostly be a procedural Vote on Account and that the Fed’s decision, though not expected to include a rate cut, will be closely watched for its commentary.
The Nifty 50 opened at 21,433.10, up from its previous close of 21,352.60, and reached an intraday high of 21,763.25 before closing at 21,737.60, up by 385 points or 1.80%. Similarly, the Sensex started the day at 70,968.10, compared to its previous close of 70,700.67, and achieved an intraday high of 72,010.22, eventually closing 1,241 points or 1.76% higher at 71,941.57. Notably, only five stocks in the 30-share pack – ITC, Infosys, JSW Steel, Tech Mahindra, and TCS – ended the day lower.
Both midcap and smallcap indices also experienced gains, with the BSE Midcap index rising by 1.68% and the Smallcap index increasing by 1.03%. The total market capitalization of BSE-listed companies expanded to approximately ₹377.2 lakh crore from ₹371.1 lakh crore in the previous session, resulting in an increase of about ₹6.1 lakh crore in investor wealth in just one day.
Top performers in the Nifty 50 included shares of ONGC (up 8.89%), Reliance Industries (up 6.80%), and Coal India (up 6.20%), while the leading laggards were Cipla (down 2.05%), ITC (down 1.53%), and Infosys (down 1.08%).
Most sectoral indices concluded with impressive gains. The Nifty Oil & Gas index led the surge with a 5.18% jump, followed by the PSU Bank index, which rose 2.43%. The Nifty Bank and Auto indices also saw increases of 1.28% and 1.68%, respectively. The only exception was the Nifty FMCG index, which dropped slightly by 0.14%, while the Media index remained unchanged.
Vinod Nair, Head of Research at Geojit Financial Services, commented that the domestic market’s uplift was driven by a combination of the recent sell-off, positive Asian market performance, and the acquisition of quality stocks at attractive prices. He noted that despite high valuations, investor confidence is bolstered by an optimistic outlook surrounding the interim budget and recent corporate earnings aligning with forecasts. Globally, the upcoming Fed policy announcement is seen as a key determinant, with investors eager to gauge future interest rate directions based on the Fed’s commentary.
From a technical perspective, Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas, observed that the Nifty breached the previous swing high of 21,750, indicating a shift in the downtrend pattern. Gedia noted that during the recent decline, the Nifty managed to hold above the 40-day average support level around 21,200, which is expected to form the lower boundary in the coming consolidation phase. He anticipates that the index could continue its recovery towards 21,913, corresponding to the 78.6% Fibonacci retracement level of the fall from 22,124 to 21,137. Additionally, a gap formed on January 17, 2024, in the range of 21,850 to 22,000 is likely to pose an immediate obstacle.
Gedia added that while the daily momentum indicator shows a negative crossover, it has reached an equilibrium point, and the absence of price weakness suggests a potential range-bound trend in the near term. Based on these factors, he revised the outlook for the Nifty to sideways, with a predicted consolidation range between 21,200 and 22,000.