Market’s trend yet undecided, IT results could be a game changer

The first week of calendar year 2024 was a tough one for the markets with the undecided which way to go. Markets gained on three of the five sessions and lost on two.

After an eventful week where bulls and bears both tried to take control of proceedings and failed, the week saw BSE Sensex lose 214.11 points or 0.30 per cent to close at 72,026.15 points, while Nifty lost 20.60 points or 0.09 per cent to close at 21,710.80 points.

The broader markets behaved differently and one saw BSE 100, BSE 200 and BSE 500 gain 0.26 per cent, 0.60 per cent and 0.82 per cent respectively. BSE Midcap gained 2.35 per cent while BSE Smallcap was up 2.68 per cent.

The Indian Rupee gained 6 paisa or 0.07 per cent to close at Rs 83.15 to the US Dollar.

Dow Jones gained on three of the four sessions and lost on just one. Yet Dow was at the receiving end and closed lower with losses of 223.43 points or 0.59 per cent to close at 37,466.11 points.

The big players traditionally used to be the FPIs and their course of action would determine the trend on Dalal Street. This seems to have changed over time. While what they do is significant, it no longer controls the market. Domestic retail investors through SIPs and mutual funds have given these mutual funds enough power to take on the might of FPIs.

We saw through the earlier part of 2023, that even though FPIs were big sellers, our markets remained resilient and were at most of the time sideways or continued to trend upwards. This new found strength over the last year or so has held markets in good stead and is forcing FPIs to relook at India. The fact that the economy is resilient in the face of adversities is another big positive. This is adding strength to markets and changing the outlook that people have about our markets.

The week ahead sees three major IT companies declare results on Thursday (January 11). The companies are TCS, Infosys and Wipro. The sector has been under pressure for some time and we saw a strong rearguard action in the sector during the last week of calendar year 2023. Whether the action was a mere rearguard action or based on fundamentals, would be known on Thursday evening. Suffice to say that IT pack has the potential to be a game changer next week.

FPIs were net buyers of equity in the cash market to the extent of approximately Rs 32,000 crore in the month of December while Domestic institutions were buyers of roughly Rs 13,000 crore. In the first week of January, FPIs were buyers of Rs 3,300 crore while domestic institutions were sellers of Rs 7,300 crore. While its early days as yet, one needs to see what are the alternatives for investment that global funds have. Currently India is a hot destination and being one of the outperformers is becoming a must invest choice for all.

Coming to the week ahead, we will see a volatile market which will continue to look for directions. There is no trend and markets are trying to find their base and rhythm. Results season for the October-December 2023 quarter would start kicking in, and that would hold the key for the trend that markets move on. The strategy would be to play safe and sell on strong rallies and buy on sharp dips. Intra-day trading opportunities would be the order of the day across sectors. A good strategy could be to play in stocks whose results are to be declared as they tend to become super volatile around that time. Based on any strong trends in the sector leaders, one could expect the peer group to take cues from the front runners. This should be a good trend setter for the coming weeks.

In terms of levels of resistance and support, markets after their sharp spurt in December 23 are still trying to find a trading zone. I believe this could take a couple of weeks to be determined. Till such time that a new trading zone is established, markets will remain volatile, range bound and fairly unpredictable. Importantly, the low volumes currently being witnessed need to pick up before a trend can be found.