Trade Setup: Market Likely To Start Muted After Sharp Correction Yesterday, Broader Stocks Tumble

The Nifty experienced a dramatic drop of 500 points from the day's high, creating waves in the market. However, seasoned investors remained unperturbed, considering the recent rally of nearly 3,000 points within two months. Thursday's correction, though lacking a clear trigger, showcased the market's inherent volatility and resilience.

While the Nifty correction caught attention, the broader markets felt even greater pain, understandable given their stellar performance this year. Stocks like IREDA and IRFC, with impressive gains of 2x and 3x, experienced a standard 6-7% correction, attributed to profit booking. This correction emphasized the risks associated with this year's outperformers.

Foreign investors maintained a net selling stance in the cash market, raising concerns among market watchers. Despite robust domestic figures, the impact of six major block deals worth nearly Rs 10,000 crore on Wednesday cannot be ignored, potentially influencing the overall market dynamics. The penultimate options expiry for 2023 for the Nifty 50 weekly contracts added another layer of complexity to Thursday's market activity.

F&O data presented mixed signals with Nifty 50's December futures shedding 5.8% and 7.4 lakh shares in Open Interest. Nifty 50's Put-Call Ratio dropped to 0.66 from 1.13 earlier, reflecting increased uncertainty. Stocks like Ashok Leyland and India Cements entered the F&O ban list, while others like IRCTC and Zee Entertainment exited. Notably, certain stocks including Manappuram Finance, SAIL, Balrampur Chini, NALCO, Indus Towers, Delta Corp, Piramal Enterprises, and RBL Bank remained on the ban list.

Options expiring on December 21 indicated increased Open Interest in Nifty 50 call strikes between 21,200 and 21,600, with the 21,300 strike seeing the maximum addition. On the put side, Wednesday's correction led to significant Open Interest shedding for Nifty 50's put strikes between 21,200 and 21,400.

Thursday's trading session is set to be influenced by significant developments in various sectors. AstraZeneca Pharma India is gearing up to launch Enhertu in January 2024, a drug crucial for the treatment of unresectable or metastatic HER2-positive breast cancer.

Mazagon Dock Shipbuilders secured a Rs 1,614.89 crore deal with the Ministry of Defence for six next-generation offshore patrol vessels for the Indian Coast Guard. Meanwhile, Cochin Shipyard inked a Rs 488.25 crore contract for the short refit of an Indian Naval ship.

In the media sector, Zee Entertainment received communication from CMEPL and BEPL, expressing their intent to enter good faith negotiations as required under the merger cooperation agreement.

Samvardhana Motherson announced an extension of the closing timelines for the acquisition of a 73.05% stake in Irillic Pvt Ltd to the end of February 2024. Embassy REIT witnessed Blackstone selling the remaining 23.5% stake, with prominent buyers including HDFC MF, Fidelity, Smallcap World Fund, and SBI MF.

Nippon India AMC saw IndusInd Bank exiting after selling 1.78 crore shares, while buyers in the block deal included SBI MF and ICICI Prudential.

Goldman Sachs and BofA Securities made significant post-listing purchases in India Shelter Finance, whereas Abakkus Asset Management, led by Sunil Singhania, acquired a stake in Shriram Pistons in a block deal.

BSE approved the appointment of Pramod Agrawal as Chairman, and ICICI Bank received RBI approval to appoint Sandeep Batra as Executive Director. India Pesticides achieved a milestone by obtaining Technical Equivalence (TEQ) certification for its Herbicide Technical Product from the European Union.

The global scenario adds another layer of complexity to the market dynamics. Benchmark indices in the Asia-Pacific region mirrored Wall Street's losses, with the Nikkei 225 declining by 1.3%, the Topix falling by 1.2%, and South Korea's Kospi down by 0.4%. Hang Seng's futures are also indicating a weak start to the trading day.

On Wall Street, both the S&P 500 and the Nasdaq experienced their worst single-day drop since September 26, declining by 1.5% each, while the Dow Jones closed 1.3% lower.

GIFT Nifty is trading with cuts of more than 30 points compared to Nifty Futures Wednesday close, indicating a start with minor cuts for the Indian market.

As the market grapples with this rollercoaster ride, investors are advised to closely monitor the developments in key sectors and global cues, exercising caution and strategic decision-making in the face of the current volatility.