Sensex falls 300 points, Nifty below 24,350. Here’s why analysts see range-bound trade

On Friday, the Indian stock market experienced a decline, with both the Sensex and Nifty remaining range-bound, despite stable oil prices. The Sensex fell by over 300 points to 77,762, while the Nifty 50 dropped by 68 points to 24,328. Broader markets remained relatively inactive, with the Nifty Midcap 100 and Nifty Smallcap 100 registering slight gains and losses.

Notable performers in the market were UltraTech Cement and Tata Steel, which saw their shares drop by more than 1% each, contributing to the overall losses on the Sensex. Conversely, several companies, including IndiGo, Trent, Asian Paints, Power Grid, Axis Bank, NTPC, HCLTech, M&M, ITC, Maruti Suzuki, and others, witnessed a decline of around 1% each.

Certain sectors, such as Nifty Metal, which fell by over 0.6%, and Nifty Auto, which dropped by 0.4%, also experienced declines. However, the market breadth remained positive, with the NSE recording 1,364 advances against 1,126 declines, while 107 stocks remained unchanged.

Analysts predict that the market's range-bound behavior is likely to persist in the near term. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, stated that Nifty has been consolidating between 23,800 and 24,400 without any indications of a breakout above the upper band or a breakdown below the lower band. The analyst noted that the market was close to a breakout above the upper band but was halted by a rise in crude oil prices above $91 due to the absence of an expected US-Iran deal. Brent crude has since cooled off to below $87, which is mildly positive for the market.

Furthermore, Foreign Institutional Investor (FII) selling has decreased and turned into buying activity recently, but a clear trend in FII activity has yet to be established. The focus is now on mid and small-cap stocks, which is expected to continue. Select private sector banks are considered value buying opportunities for the long term.

From a technical perspective, Nifty's hammer formations over the last two days, after the 20 DMA stepped in to curb downside attempts, suggest bargain-hunting. Despite the absence of risk appetite to drive prices higher, oscillators remain supportive of an upside move, aiming for 24,540-24,666 initially, followed by 24,850-25,100. However, given the recent market swings, it is crucial to monitor the downside marker near 24,329-24,240, as stated by Anand James, Chief Market Strategist at Geojit Investments.