Trade Setup On Monday: Nifty May Find Support From 21,500-21,600 On New Year's Day; Key Factors To Drive

Sensex and Nifty 50 are likely to witness a cautious mood in the opening bell of the first day of the New Year 2024 (January 1). In the early trade, Gift Nifty traded in the red. There will be a lack of support for market sentiments from Asian, US and European shares as they are closed due to the celebration of the new year. Nevertheless, Nifty is expected to find support between 21,500 to 21,600 levels. Both the benchmarks have ended the year 2023 with robust gains and record high levels.

The domestic equities will see movement according to the upcoming key factors especially the onset of Q3 earnings season for FY24 with IT companies lining up for their financial reports in early January. Also, a few immediate focuses of bulls and bears in the stock market will be on inflation data, interim Union Budget for FY25, RBI policy, and economic growth followed by the General Election 2024 trajectory.

Monday's Trade Outlook:

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher expects Nifty to find support between 21,600 to 21,550, while resistance is seen around 21,900 to 21,950. Further, Bank Nifty is seen to find support between 47,900 to 47,850, and resistance is likely around 48,600 to 48,650.

Ajit Mishra, SVP - of Technical Research, at Religare Broking said, "We may see further consolidation in the index and it would be healthy after the recent surge. We expect Nifty to hold the 21,300-21,500 zone in case of a dip during consolidation and reiterate our positional target of 22,150 level. Participants should stay focused on the selection of stocks and prefer index majors."

Stocks To Buy:

Koothupalakkal has recommended buying three stocks on January 1, 2024. These are:

- BUY KRBL cmp 375 Stop Loss 369 Target 690

- BUY FINOLEX CABLES cmp 1069 Stop Loss 1050 Target 1130

- BUY MTAR TECH cmp 2208 Stop Loss 2170 Target 2320.

Weekly Outlook:

As per Dr Joseph Thomas, Head of Research, Emkay Wealth Management, after an ebullient market which touched lifetime highs, fostered by strong economic numbers and good inflows from overseas investors, and prospects of lower interest rates witnessed some amount of correction on the last trading day of the week. Some selling was witnessed in large-cap stocks, mainly in the Banking, Tech, and Oil & Gas sectors. Profit booking and the developments around the Middle East, the movements in the Dollar Index etc. are likely to influence the markets at the periphery in the coming week.

Further, Rakesh Mehta, Chairman of Mehta Equities said that India continues to be the fastest-growing economy in the world, and BJP's win in recently-held state elections has further boosted investors' sentiment. With macroeconomic factors beginning to turn positive, falling US bond yields have once again fueled robust foreign fund inflows into the Indian market. Along with that, sliding crude oil prices are likely to keep inflation under check, all of which should augur well for Indian equity markets going ahead. Hence, the rally in the market is likely to further continue over the next 3-6 months and Sensex & Nifty could see another 5-7% appreciation while mid-cap & small-cap indices may witness another 10-15% jump. The government's thrust on the manufacturing sector is already seeing public sector companies, especially defence, railway, banking and financial services companies, attract a lot of investors' attention. In times of correction, exposure to quality stocks in the above sectors would benefit investors.

Also, Mehta added that the immediate focus would be on Q3 earnings which should be in line with street expectations and any deviation in earnings would be a reason for markets to go into a profit booking zone. The Budget would be a no event and the major focus would be on Lok Sabha elections in May 2024, which would drive the overall market sentiment."

Meanwhile, Pravesh Gour, Senior Technical Analyst at Swastika Investmart said, this week, as global cues remain sparse ahead of a New Year there will be no trading in the US, or most of the European and Asian Markets on January 1, domestic market dynamics are expected to steer sector- and stock-specific movements. The movement of the rupee against the dollar and crude oil prices will be closely watched by investors next week, as they are likely to dictate the overall trend on the bourses. Additionally, auto stocks are expected to be in focus as major automakers will begin releasing their December sales figures starting from January 1. These sales figures will provide valuable insights into consumer demand and the health of the auto industry, potentially impacting the performance of related stocks.

Gour added Nifty is continuing its bullish momentum; however, 21800-22000 could be a profit-booking zone. On the downside, 21500 is an immediate and strong support level, while a rising 20-DMA around 21200 will be the key support level. Above 22000, 22220 will be the next target level.

Furthermore, Gour said, Banknifty is consolidating where 48500-48800 is an immediate resistance area; above this, 49500-50000 will be the next target zone. On the downside, 477700 is an immediate support level, while 47000 will be the next major support level. FII's long exposure in index futures remains at 70%, accompanied by a put-call ratio of 1.12, both indicating a neutral to positive market sentiment.

On the macro front, Swastika's analyst said that the US Fed Reserve will on 4th January 2024 release the Minutes of the Federal Open Market Committee meeting held in December 2023. US Nonfarm Payrolls data for December will be announced on 5th January 2024.

2023 Performance:

Last week, on December 29th which is the last trading day of 2023, Sensex ended at 72,240.26 down by 170.12 points or 0.23%. Nifty 50 settled at 21,731.40, lower by 47.30 points or 0.22%. Also, Bank Nifty shed 216.30 points or 0.45% to close at 48,292.25.

Nevertheless, the Indian market's 2023 has broadly been of strong bulls.

Sensex closed the year 2023 with gains of a massive 11,072.47 points or 18.10%, while Nifty 50 surged by 3,533.95 points or 19.42% to end at 21,731.40. In the last month of the year, Sensex and Nifty touched a new record high of 72,417.01 and 21,801.45.

Talking about the performance of the market, Vinod Nair, Head of Research at Geojit Financial Services said, that despite a slight profit booking on the last trading day of the year, the domestic market experienced a gradual rally, riding on the positive global market trend. The optimism is fuelled by expectations of rate cuts by the US Fed and a cooling global inflation scenario. Further, an ease in Red Sea disruption and a reversal of FII inflows supported the market to touch new highs. The anticipation of political stability in the upcoming national poll in 2024 and a positive market outlook are supportive factors. Sector-wise, auto and FMCG outperformed in expectation of a revival in demand, while the IT sector underperformed due to profit booking.

According to Gour, 2023 is known for the record year Nifty rallies by 20% in 2023; India is the first country to have a consecutive 8th year of positive returns in Indices (Nifty and Sensex); SME platforms saw record fundraising in 2023; DIIs outpaced FII flow for the 3rd year in a row; and last but not least, listed PSU M-cap up by Rs. 19.95 lakh crore in 2023.

Nair added, "The euphoria is expected to continue during the start of the next year on account of the exuberance of rate cuts and the drop in bond yields. We expect a modest return of 10 to 12% on the main market in CY24. It is advised to diversify the investment pattern to multi-assets. It is suitable to be diverse when equities are trading above the long-term average for a prolonged period. We presume CY24 to be a year of reversal in sector and category-wise. We like large caps compared to mid and small caps. Generally, it will be a stock- and sector-specific year. Sectors we like are Banks, Manufacturing, Pharma, Chemical and IT. A correction in the consumer sector should be capitalised in CY24."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.