Pressure on domestic markets amid Asian stock declines

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Domestic markets will likely open flat on Thursday amid mixed global cues. Gift Nifty at 21,603 indicates a flat opening as Nifty Jan futures on Wednesday closed at 21,600.

Asian stocks are in red in early Thursday deals, signalling domestic markets may remain under pressure. Market experts believe the correction phase will continue in domestic markets due to institutions’ lack of follow-up buying. On Wednesday, both FPIs and domestic institutions remained sellers.

According to analysts, the market currently lacks fresh triggers to go up, so investors resort to profit-taking, which is good for overall market sentiment. The focus now shifts to the upcoming result season, said experts.

In a market outlook for 2024, SBI Funds Management said Putting behind the tepid growth seen in Nifty earnings in the pre-Covid period, FY23 saw an 11.5 per cent earnings growth (adjusted for one time) and the expectation for FY 24 and FY25 remains very strong. At the beginning of FY23, earnings growth was expected at 11.9 per cent and has subsequently improved to 14.5 per cent. The 3-year CAGR between FY22 and FY25 stands at 15 per cent, underscoring the strong underlying growth momentum. The note from the fund house said that H1-FY24 had a very strong YoY growth of 27.5 per cent in Nifty earnings.

Growth in the consumer-facing names has been very strong as margins have been robust on the back of lower input costs and good pricing power. IT earnings have been weak on the back of poor demand conditions. The materials sector has seen price corrections, which has impacted earnings. The strong H1 performance implies a modest required run rate of around 12 per cent in the second half to maintain current FY24 growth expectations.

“Expectations are strong in sectors like Consumer Discretionary (primarily Auto), Healthcare and Materials,” SBI Funds Management said.

According to Ajit Mishra, SVP – Technical Research, Religare Broking, it is a healthy correction so far despite the underperformance of two key sectors, viz. banking & IT, and participants should focus largely on buying opportunities on dips till Nifty holds the 21,200 level. “Defensive viz. pharma and FMCG are attracting noticeable interest on the expected lines while others are contributing on a rotational basis. Traders should align their positions accordingly but refrain from aggressive longs,” he added.