Sensex Down 199 Points, Nifty at 22,929; Nifty Prediction for Monday
Nifty Prediction for Monday
Market Closes in the Red: What to Expect for February 17
Indian equity markets continued their downward trajectory on February 14, as benchmark indices slipped below crucial psychological support levels in a volatile trading session.
The Sensex fell by 199.76 points, or 0.26%, closing at 75,939.21, while the Nifty lost 102.15 points, or 0.44%, ending the day at 22,929.25.
This marked the eighth consecutive day of losses for the indices, reflecting a sustained bearish sentiment in the market.
With the absence of any positive catalysts and growing concerns around weak corporate earnings, investors have remained cautious, continuing to book profits across both frontline and sectoral stocks.
Market Overview: A Broad-Based Decline
The market breadth was heavily skewed in favor of the bears, with 642 stocks rising, but a significant 3,200 stocks declining, and only 73 stocks remaining unchanged.
Among the major losers in the Nifty, stocks like Bharat Electronics, Adani Enterprises, Adani Ports, Sun Pharma, and Trent were heavily impacted, reflecting the broad-based weakness in the market.
On the other hand, Britannia Industries, ICICI Bank, Nestle India, Infosys, and TCS saw gains, indicating some pockets of strength despite the overall market decline.
The broader market indices were hit even harder. The Nifty Midcap index fell 2.4%, while the Nifty Smallcap index experienced a sharper decline of 3.5%.
The small and mid-cap stocks, which had been attracting investor interest in previous months, have now become a significant source of concern as corporate earnings have failed to meet expectations.
This has led to heightened selling pressure in the smaller stocks, further fueling the market’s negative momentum.
Sectoral Performance: Broad-Based Weakness
Every major sectoral index closed in the red, highlighting the widespread nature of the current market weakness.
Among the worst-hit sectors were media, metals, oil and gas, pharma, PSU banks, real estate, consumer durables, and auto energy.
These sectors all saw declines ranging from 1-3%, reflecting both global and domestic pressures.
- Media & Entertainment: The media sector faced a significant pullback due to concerns over advertising revenues, higher content costs, and a shift in consumer preferences. Investors remained concerned about the slower-than-expected recovery in ad spending.
- Metals: Global uncertainties, including potential tariff changes and weak demand in key markets, weighed heavily on metal stocks. Coupled with a depreciating rupee, which impacts the cost of imports, these stocks experienced significant selling pressure.
- Oil and Gas: Despite rising global crude oil prices, the sector suffered due to concerns over global demand growth and the impact of higher input costs on margins. Domestic oil and gas companies are also facing challenges related to regulatory pressures and potential tax hikes.
- Pharma & Healthcare: The pharma sector, which had been a haven for investors during previous market downturns, came under pressure as weak earnings reports from key players raised doubts about the sustainability of growth. Rising raw material costs and regulatory hurdles also dampened sentiment.
- PSU Banks: Despite some initial optimism, public sector banks continued to struggle with weak loan growth, non-performing assets (NPAs), and profitability challenges. Investors are increasingly skeptical about the ability of these banks to recover from their current challenges.
- Real Estate & Auto: The real estate sector remained under pressure due to rising interest rates and slowing demand in the housing market. Similarly, the auto sector continued to face weak domestic demand, rising input costs, and global supply chain disruptions.
Technical Outlook: Bearish Trends Continue
Rupak Dey, Senior Technical Analyst at LKP Securities, indicated that the bearish trend on the Nifty continues, with the index closing below the key psychological level of 23,000 after staying above it for several sessions.
Although the index managed to close 155 points higher than its low, the overall sentiment remains weak.
The Nifty continues to trade below its important short-term moving averages, signaling a lack of positive momentum.
From a technical standpoint, the immediate support level for Nifty is around 22,800, and a breach of this level could result in further panic selling.
On the upside, resistance is expected at 23,100. If the Nifty manages to break through this resistance level, it could signal a potential short-term relief rally.
However, the overall market trend remains bearish, with the possibility of more volatility in the near term.
Investor Sentiment: Risk Aversion Dominates
Vinod Nair of Geojit Financial Services highlights the increasing dominance of risk aversion in investor sentiment.
Corporate earnings have come in much lower than expected at the start of the year, particularly for mid- and small-cap companies.
Weak earnings, coupled with external factors like the depreciation of the rupee and rising commodity prices, have caused a sharp decline in investor confidence.
The ongoing weakness in corporate earnings is a significant concern. Mid- and small-cap companies, which were previously seen as high-growth opportunities, have underperformed, leading to further selling.
Moreover, with the rupee continuing to weaken against the US dollar, foreign institutional investors (FIIs) have been withdrawing funds, adding to the market’s volatility.
The depreciation of the rupee also raises concerns over inflationary pressures, which could further impact earnings growth for Indian companies, especially those reliant on imports.
Nair expects that this risk aversion will continue in the near future, with volatility persisting until there is greater clarity on global issues like tariffs and domestic factors like corporate earnings and inflation.
Foreign Fund Outflows and Currency Depreciation
Prashant Tapase from Mehta Equities notes that the persistent foreign fund outflows and the continued depreciation of the rupee have weighed heavily on investor sentiment.
These factors, combined with weaker-than-expected corporate earnings, have led investors to continue booking profits, particularly in large-cap stocks.
The benchmark indices have slipped below their crucial psychological levels of 76,000 for the Sensex and 23,000 for the Nifty, signaling a shift in market sentiment towards caution.
The ongoing outflow of foreign funds is a key concern for the market. With global markets also facing uncertainty, particularly with concerns over inflation and interest rates, foreign investors are becoming more cautious about Indian equities.
The depreciation of the rupee against the dollar adds another layer of uncertainty, particularly for exporters and companies with significant dollar-denominated debt.
Market Prediction for February 17: What Lies Ahead?
Looking ahead to February 17, the market is likely to continue facing volatility, with no immediate catalysts to reverse the current bearish trend.
The weak earnings reports, depreciation of the rupee, and ongoing concerns over foreign fund outflows are expected to keep sentiment subdued.
Moreover, global macroeconomic factors, such as inflation and the geopolitical landscape, will continue to play a critical role in determining market direction.
Technical analysis suggests that the Nifty will face resistance around the 23,100 level, and a break above this could provide some short-term relief.
However, the broader trend remains uncertain, and further weakness cannot be ruled out. For investors, caution and risk management will be paramount as they navigate this period of heightened uncertainty.
In conclusion, the market outlook for February 17 remains bearish in the absence of positive catalysts.
Volatility is expected to persist until there is more clarity on the macroeconomic environment and corporate earnings.
Investors should remain vigilant and consider adopting a cautious approach, particularly in the current risk-off environment.
