nifty: ET Market Watch: 5 factors why markets went down post a stellar 1st trading day of 2024?

Sensex and Nifty both hit record highs on the first trading of 2024. However, on Jan 2, the Sensex ended the day 379 points weaker at 71,892 while the Nifty ended at 21,666.

Small and midcaps were relatively less affected. But there were other reasons behind the fall too – here are the top key factors behind the fall:

1. The January Effect
In the last 12 years, Nifty has given negative returns in 7 instances in January. It has given negative returns for 5 years in a row between 2019 and 2023.

2. Profit booking
Nifty saw a sell-off in the last 30 minutes of the Jan 1st trading session, signifying the market can be vulnerable at peaks due to profit booking.

3. Valuations
Even though valuations of Sensex and Nifty are not in the danger zone yet, investors have been raising concerns about the possibility of euphoria building up in pockets of the market, particularly in smaller stocks. Kotak Institutional Equities says that Nifty could expect a 1% upside by Dec 2024 and a time correction is expected

4. Global markets and geopolitical tensions
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.6%.
Japan markets were closed for a holiday while Hong Kong’s Hang Seng Index lost 1.85%. Oil prices jumped after U.S. forces repelled the Houthis in the Red Sea. Brent crude climbed above $78 a barrel after declining by 5% over the prior three sessions, with West Texas Intermediate near $73.

5. Weak earnings outlook from IT
Q3 earnings season will start next week and there are weak earnings outlook coming in from IT. Companies like TCS and Infosys will lead the Q3 show on Jan 11.