Indices shrug off West Asia conflict, snap out of four-day losing streak
Amid global uncertainties, strong performance of large-caps led to the rebound
Indian equities rebounded on Friday after making early losses to snap its four-day losing streak after Iran indicated it had no plans for retaliation against Israel.
Shares across Asia ended in a sea of red, with Japan and Taiwan leading the fall, despite Iran’s “talk-down” on the Israel attack. European indices traded lower.
The Sensex sank 672 points in early trade on Friday amid reports of explosions in Iran, before reversing course to end 599 points, or 0.83 per cent, higher at 73,088, helped by short covering and bargain hunting. The Nifty settled at 22,147, up 0.7 per cent. The indices shed 1.5-1.6 per cent during the week. Cash market volumes on the NSE fell to ₹1lakh crore on Friday. Broad market indices fell even as the advance-decline ratio remained flat at 0.84:1.
Private banks were in the limelight ahead of HDFC Bank results to be announced over the weekend. Weak guidance from Infosys led to selling pressure across IT stocks. Mid- and small-cap stocks also corrected, highlighting concerns over premium valuations. Bajaj Auto and HCL Tech were the top Nifty losers, down 2.4 per cent and 1.3 per cent, respectively. Bajaj Finance rose 3.3 per cent.
MULTIPLE FACTORS
Vinod Nair, Head of Research,
Geojit Financial Services, said: “Indian markets staged a recovery as the week drew to a close, fuelled by strong performances in large-cap amid global uncertainties. Optimism prevailed with hopes of limited prospects of escalation in Iran-Israel tensions.”
The situation in West Asia, potential delay of a US rate cut due to higher-than-expected inflation, robust retail sales, and elevated oil prices weighed on sentiment globally. This was evident through notable upticks in the dollar index, US bond yields, and the price of yellow metal, said Nair.
Muted Q4 earnings expectations and weak IT results could extend market consolidation. “GDP, PMI, and jobless claims data from the US next week will provide further insights into the Fed’s policy. Additionally, Indian PMI data and Q4 results are anticipated to shape market trends in the coming week,” Nair said.
The short-term trend of Nifty seems to have reversed up after forming a bullish reversal type candle pattern on Friday, said analysts. The next resistance for Nifty is around 22,500 levels, with immediate support at around 22,000 levels.
“Expectations of healthy earnings from index heavyweights and buying emerging at lower levels are showing strength in the market. The focus will remain on the earnings season next week along with global cues,” said Siddhartha Khemka, Head Retail Research, Motilal Oswal Financial Services.