Markets fall amid sharp volatility

Indian equity markets fell on Tuesday amid sharp volatility and thin volumes. Benchmark indices swung between the day's high and low, with the Nifty finally closing 76 points lower at 21665.80 and the Sensex ending with a cut of 379 points at 71892.48. The market witnessed volatility amid divergent views between clients – retail/HNI proprietary traders and institutions.

While clients held net cumulative short positions of 59,201 contracts in Nifty and Bank Nifty futures, FIIs were net long on 81,357 contracts as on 1 January. DIIs were net long on 1971 contracts. In the cash segment, while FPIs and DIIs purchased shares worth a record 1.71 trillion and 1.85 trillion last year, clients sold shares worth 72,921 crore.

“The volatility could persist in the new year as the market has run up very sharply in December and seasonally January tends to be weak," said Rohit Srivastava, founder, IndiaCharts. Key indices were largely dragged down by financials, auto and information technology stocks, as selling pressure emerged at near record high levels.

"A bearish candle has emerged on the daily Nifty chart, indicating a potential bearish trend in the near future. Sentiment is expected to stay bearish as long as it remains below 21,750. Any upward movement toward 21,750 could encounter selling pressure. However, a clear breakout above 21,750 could shift sentiment in favour of the bulls.

Support is established at 21,500 on the lower end," said Rupak De, senior technical analyst at LKP Securities. While individual investors have been net sellers of equities in the current fiscal year, foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) have been actively buying.

FPIs’ net purchases at 66,135 crore in December stand at a record high for any month, as per National Securities Depository Ltd (NSDL), while exchange data shows DIIs bought net 12,942 crore worth of shares during the month. The same data for and NSE shows clients sold shares worth 14,633 crore in December.

On an annual basis, too, while FPIs purchased a record 1.71 trillion worth of shares in calendar year 2023 and DIIs bought 1.85 trillion, clients sold 72,921 crore worth of shares in the secondary market. Even cash market activity on BSE and NSE shows that while institutions have been bullish, clients or retail/high net worth individuals (HNIs) have booked profits in the calendar year, which has seen the Nifty jump 20% to close at 21,731.4 on 29 December.

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