Nifty, Sensex Fall as IT & Banking Stocks Drag

resr 5paisa Research Team

Last Updated: 17th January 2025 - 12:16 pm

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Benchmark indices Nifty and Sensex opened on a weaker note on January 16, putting an end to their three-day winning streak as global cues turned unfavorable. Investor sentiment had improved recently due to lower-than-expected US inflation data for December, but the initial optimism in global markets gave way to profit booking. Additionally, a series of key quarterly earnings reports influenced domestic market movements, adding further pressure.

A sharp decline in banking and IT stocks weighed on both indices, though gains in heavyweight Reliance Industries helped limit the losses to some extent. At 10:03 AM IST, the Sensex fell 363.79 points (0.47%) to 76,679.03, while the Nifty slipped 90.15 points (0.39%) to 23,221.65. Market breadth showed 1,830 stocks advancing, 1,240 declining, and 119 remaining unchanged.

Despite expectations of a relief rally following a rough start to 2025, analysts suggested that it might not be strong enough to shift the underlying market sentiment. Concerns about slowing earnings growth—a key theme in the Q3 results season—have led many investors to adopt a "sell-on-rise" strategy. Another factor weighing on market sentiment is the persistent selling by foreign institutional investors (FIIs). According to VK Vijayakumar of Geojit Financial Services, even a declining US dollar index and lower bond yields have failed to stem FII outflows, making the market vulnerable. He emphasized that any major recovery will likely be met with fresh selling pressure.

The market remains trapped in an oversold territory, with unchanged fundamentals and multiple headwinds, leaving little room for a strong rebound. January’s seasonal weakness is becoming more pronounced, with the Nifty down around 2% this month. Several factors are contributing to this slump, including uncertainty surrounding the upcoming budget, potential policy shifts under Donald Trump, the Federal Reserve’s interest rate cut trajectory, and concerns over stretched valuations and earnings growth.

Among individual stocks, Infosys stock fell over 5%, making it the worst performer on the Nifty 50. Although the IT giant reported better-than-expected Q3 earnings, its weaker Q4 revenue growth guidance triggered a sell-off. Axis Bank also declined nearly 5% after its subdued Q3 results, which revealed higher slippages and weak deposit growth. Brokerages responded by lowering their target prices, and the bank’s management anticipates subdued deposit and credit growth until FY26 due to a challenging economic environment.

On the other hand, Reliance share price surged nearly 3%, easing some of the pressure on the two indices. The oil-to-telecom giant’s strong Q3 results and expectations of improving business performance after a six-month sluggish period fueled investor optimism.

Broader market trends remained weak, with mid- and small-cap indices slipping 0.2% and 0.3%, respectively. The sectoral performance was mixed, with Nifty IT losing over 2%, making it the worst-performing sector, dragged down by Infosys, TCS, Wipro, and HCLTech. Nifty Bank also declined by over 1%, impacted by losses in Axis Bank, ICICI Bank, and Kotak Mahindra Bank. However, Nifty Energy, Nifty Metals, and Nifty Infra gained nearly 1% each, benefiting from a weaker dollar index.

According to Akshay Chinchalkar, Head of Research at Axis Securities, the market's next seven days will be critical in determining its direction. He noted that for a sustained upside move, bulls need to break past 23,471. However, failing to cross 23,820 on a daily close basis in the coming sessions could indicate that the recent rebound was driven more by short-covering than strong institutional buying.

Among the top gainers on Nifty, Reliance Industries, Hindalco, BPCL, and Coal India posted notable gains. Meanwhile, Infosys, Axis Bank, TCS, HCLTech, and Wipro were the biggest laggards.

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