Sensex and Nifty Retreat After Reaching New Intra-Day Records

On Thursday, the Bombay Stock Exchange's benchmark index, the S&P BSE Sensex, and the National Stock Exchange's Nifty 50 surged to record intra-day highs but subsequently retreated. The Nifty 50 peaked at 26,310.45 points, while the Sensex reached 86,055.86 points during trading hours. However, both indices could not maintain these highs, closing at 26,215.55 and 85,720.38 points, respectively.

Market analysts have indicated that this fluctuation is a possible reflection of profit-booking activities among investors, particularly in large-cap stocks. Nagaraj Shetti, a senior technical research analyst at HDFC Securities, noted that the formation of a small red candle on the daily chart suggests a consolidation phase following the recent breakout. He expressed that the market might experience some instability before any significant upward movement occurs.

Immediate support levels for the Nifty are identified at around 26,100 to 26,050, with potential resistance at 26,600. Ashwani Shami, the president and chief portfolio manager at Omniscience Capital, acknowledged that the recent drop from record levels should not raise alarm, attributing this to a reassessment of portfolios rather than a fundamental shift in market sentiment.

As per a report from Kotak Institutional Equities, while the earnings growth for the Nifty 500 companies showed an improvement with a 17% year-on-year increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA), the overall revenue growth remains modest at just over 6%. Analysts are optimistic about the earnings outlook, particularly for large- and mid-cap companies, due to sector-wise stability driven by upgrades in key areas like oil and gas, banking, and IT services.

Sunny Agrawal, head of fundamental research at SBI Securities, commented on the current market dynamics, stating that the recent rally appears to be driven primarily by large-cap stocks, which often lead initial market gains before mid- and small-cap stocks follow suit. The Nifty Smallcap 250 index closed 0.4% lower at 16,770.05, while the Nifty Midcap 100 ended 0.1% higher at 61,113.15.

Notably, heavyweight stocks such as Reliance Industries, Maruti Suzuki, and Bharti Airtel have seen profit-taking, which has capped overall gains in the indices. Despite these fluctuations, Agrawal maintains a positive outlook for sectors such as banking and financial services, which are expected to benefit from solid earnings growth. The potential for a telecom tariff hike and stable crude oil prices are also seen as positive indicators for various sectors.

As market watchers continue to assess the situation, the overall sentiment remains cautiously optimistic, with many looking ahead towards potential opportunities for investment in the near future.