The market kicked off the new year with optimism, extending morning gains and closing nearly half a percent higher on January 1, 2025. Despite an initial dip, buying activity in heavyweight stocks across various sectors quickly reversed the losses, helping push the index higher. However, a significant hurdle remains as the index trades below its 200-day moving average (200DMA).
Broad-Based Recovery Across Sectors
Most sectors contributed to the recovery, with auto and energy stocks emerging as the top performers. The biggest contributors to Nifty’s gains were HDFC Bank, Larsen & Toubro, Reliance Industries, and M&M. Additionally, Maruti Suzuki and M&M saw significant gains, fueled by strong monthly sales data.
The broader market followed the same positive trend, with gains ranging from 0.4% to 1.05%.
Easy Trip Planners Faces Setback
Shares of Easy Trip Planners ended in the red after the resignation of Nishant Pitti, one of the company’s co-promoters and CEO, effective January 1, 2025. Pitti, who had been with the company since 2008, cited personal reasons for stepping down. Pitti also announced plans to sell his 14% stake in the company but was only able to offload 1.4% of the stake on January 2.
Market Outlook: Positive Start Amid Challenges
Rahul Sharma, Director and Head of Technical & Derivative Research at JM Financial Services, noted that markets had a strong start to the year, with the Sensex rising over 400 points and the Nifty gaining over 100 points in the early part of the session. He highlighted that comparing the domestic markets with US markets, the Nifty 500 vs. S&P500 ratio suggests India is likely to outperform the US in the first half of January. This recovery is partly attributed to the oversold conditions at the end of 2024, with FII shorts reaching their highest levels in three months.
Sharma cautioned, though, that while a market bottoming is not yet evident, a meaningful rebound from current levels cannot be ruled out.
Key Drivers for Market Recovery
Vinod Nair, from Geojit Financial Services, emphasized that the market’s positive start was broad-based. The sustainability of this trend depends largely on Q3 earnings growth, where expectations are positive on a quarter-on-quarter basis. An improvement in core sector data, combined with the potential ramp-up of government capital expenditure (capex) for the remainder of the fiscal year, is expected to benefit sectors like capital goods, industrials, auto, and power.
Nifty Faces Seasonal Headwinds
The broader market’s challenge in January lies in the seasonality factor. Historically, January has been a weaker month for the Nifty, with losses ranging between 0.3% and 2.5% over the past six years.
The month of January also brings a host of economic data, including auto sales figures for December, PMI data, and quarterly business updates from banks and other companies. In addition, the Federal Reserve is set to meet later in the month, marking the first key trigger for the markets before the Union Budget announcement on February 1.
Foreign Institutional Activity
Foreign institutional investors continued to remain net sellers in the cash market on January 1, while domestic institutional investors continued to be net buyers, contributing to the market’s upward momentum.
Upcoming Market Triggers
The weekly expiry of Nifty 50 options on Thursday, combined with broader economic data, will play a key role in shaping market sentiment in the coming days. Additionally, any further developments from the Fed meeting will be closely watched as an early indicator for global market trends heading into February.
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