After falling for three consecutive days, Indian markets are expected to show some resilience on Friday. SGX Nifty indicates a gap-up opening of 70 points for Nifty.

According to analysts, though headline benchmark indices will move in a narrow range, some beaten-down counters in the mid and small-cap space may see some value buying at lower levels. However, with valuations remaining stretched, the recovery may not be a one-way direction, they cautioned, as the second-quarter results and some of the management commentary signal input cost pressure.

Institutional selling

Lack of institutional buying is a major concern, said analysts. In October alone, both FPIs and domestic institutional investors sold shares worth almost $2 billion. FPIs on Thursday alone sold shares worth ₹2,818 crore, taking their selling to ₹7,172 crore in October. On the other hand, DIIs, who turned net buyers for first time in last 8 days, were sellers to the tune of ₹5,986 crore in October.

Binod Modi, Head Strategy, Reliance Securities, said September quarter earnings reported by select consumer companies showed margin pressures led by higher input cost despite healthy revenue. This along with soft commentary from various managements due to higher input costs weighed on sentiments, which raised concerns about sustainability of earnings growth, he said

“Further, a sharp rally in market in recent period made risk reward proposition a bit unfavourable, which also triggered profit booking. Mid-cap stocks remained under extreme pressure due to growing apprehensions about earnings,” he added.

Mohit Nigam, Head – PMS, Hem Securities, said the broader market is witnessing a sell off compared to benchmark indices as we can say that some stocks which have massively rallied in the last one month and were trading at significantly stretched valuations had witnessed major profit booking in the last 2–3 days.

“Benchmark indices witnessed sell off for a third consecutive session. We believe the profit booking which was witnessed is healthy for the market and any significant dip is a good opportunity to accumulate quality stocks,” he added.

SGX Nifty is currently ruling at 18,270 as against Nifty futures Thursday close of 18,203. US stock indexes were mixed on Thursday with the Dow Jones Industrial Average ending flat while the S&P 500 and the Nasdaq Composite gained.

Most Asian stocks are ruling mixed in early deal on Friday with marginal gains or losses.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities, said a long negative candle was formed with lower shadow, which indicate an emergence of buying interest from the lows. This also signals a possible completion of recent downward correction in the market.

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