Trade Setup: Key Factors To Drive Market Sentiment On Wednesday; 3 Dividend Stocks Are Intraday Picks

Indian market may see a cautious performance on Wednesday with Nifty likely to find support around 21,100 levels. Stock-specific action is expected in the market amidst ongoing Q3 results and also investors may look to position their portfolio for the interim budget. In the previous session, Sensex and Nifty erased their psychological mark of 71,000 and 21,500 to end by 1.5% down each.

In the early trade of Wednesday, Gift Nifty traded marginally up. While Asian shares were trading lower despite Wall Street extending its record-high gains overnight. Investors eye a host of corporate earnings, and rate cut prospects to observe growing optimism in the US economy.

On January 23rd, the Indian stock market was in a frantic selling with Sensex and Nifty erasing their critical mark of 71,000 and 21,500. The 30-scrip benchmark nosedived by 1053.10 points or 1.47% to end at 70,370.55, while the 50-scrip benchmark fell by 333 points or 1.54% to close at 21,238.80.

Talking about the selloffs, Vinod Nair, Head of Research, at Geojit Financial Services said, the market witnessed a continuous decline today, abruptly turning negative despite a positive start, mainly due to substantial selling in heavyweight sectors, particularly finance. Mid and small-caps witnessed more decline compared to the main indices. Selling by FIIs due to reasons like high valuation and mixed results for the earnings season so far, along with recent escalations in tensions in the Middle East and the Red Sea, prompted the investors to book profit from the recent rally.

Day Trade Guide Today:

Going forward, Nair said, markets are likely to witness stock-specific actions during the ongoing earnings season.

Further, Prashanth Tapse, Senior VP (Research), Mehta Equities said, that despite positive momentum in the global market, selling pressure continued today in the domestic markets mainly on the back of news that is worrying FIIs, as SEBI has drafted a paper to impose tightened ultimate beneficial ownership norms for overseas investors with effect from February 1."

He further said, this was despite pressure from foreign banks and a few offshore fund managers to ease the rules ahead of the deadline. If this stands true domestic markets may see more selling in the range of Rs 1.5 lakh crore to Rs 2 lakh crore over the next six months by funds unable to comply with the norms. The recent selloffs in Indian markets have been triggered by heavy offloading by FIIs in the past few sessions and today's slump could be due to mixed earnings outcomes so far and higher valuation worries.

Tapse added, "There are indications that rate cuts in the US may not happen soon because of inflation playing truant there, and hence investors are getting uncomfortable with the current valuations. Although India's growth prospects for the year appear positive, the slowdown in China and other developing countries may lead to demand slowdown and push investors to curb their equity exposure going ahead."

To investors, Ajit Mishra, SVP - Technical Research, Religare Broking said, "The pace of decline shows more pain ahead and the 20,800-21,000 zone may offer some support. Earlier, we were seeing private banking majors facing the heat but it is now cascading to the other sectors and also to the broader indices. We thus recommend keeping a check on leveraged positions and maintaining shorts too."

Technical Outlook:

Shiju Koothupalakkal - Technical Analyst at Prabhudas Lilladher expects Nifty to find support at 21,100 and resistance around 21,400 on the January 24th trade. While Bank Nifty is expected to have support at 44,500 and resistance at 45,500.

On Nifty 50, Rupak De, Senior Technical Analyst, LKP Securities said, a few days of consolidation have led to a decline, with Nifty slipping below the lower end of the recent consolidation range. The bearish sentiment appears to be strengthening as Nifty closed at its lowest points on multiple days. Weakness may persist in the short term, with support at 21,200; below this level, the index could potentially decline towards 21,000 and beyond. Looking ahead, the market may continue to be a "sell on rise" scenario as long as it remains below 21,500.

While on Bank Nifty, Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities said, the market experienced a dominant bearish trend, with sustained selling pressure causing a decline throughout the day. The current sentiment suggests a "sell on rise" strategy, emphasizing the prevailing bearish outlook. Immediate resistance is identified at 45,500 levels, and any upward movement towards this level is viewed as an opportune moment to consider selling positions. On the downside, crucial support is established around the 45,000-44,800 zone. A breach below this support range may intensify the selling pressure, potentially leading to a decline towards the 44,000 mark.

Stocks To Buy Today:

Koothupalakkal has recommended buying three stocks on Wednesday. They are:

- BUY BAJAJ AUTO cmp 7095.90 Stop Loss 6970 Target 7350

- BUY ZYDUS LIFE cmp 729 Stop Loss 718 Target 757

- BUY NBCC cmp 105.25 Stop Loss 102 Target 112

These three stocks hold a consistent track record of paying hefty dividends. In 2023, Bajaj Auto paid up to 1400% dividend aggregating to Rs 140 per share, while Zydus Lifesciences delivered about 600% dividend valuing to Rs 6 per share. Meanwhile, NBCC paid about 54% dividend aggregating to Rs 0.54 per share.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.