Domestic markets are set to open significantly higher on Friday ahead of the Union Budget. Anticipated fresh monthly F&O contracts on the NSE are expected to start on a positive note, with Nifty trading at Gift City indicating a potential gain of at least 200 points. Analysts are predicting that short-covering will drive the market up due to its oversold position.
Nuvama Alternative & Quantitative Research highlighted that extreme FII shorts and oversold conditions could trigger a bounce in heavyweights. They mentioned, “Indian equities are deeply oversold due to a broad market sell-off. FIIs hold an extreme short position (89 per cent shorts vs. 11 per cent longs). Historically, such set-ups trigger sharp short-covering rallies, potentially driving a 3-5 per cent bounce, especially in FII-heavy sectors like Private Financials, where attractive valuations and domestic inflows add support. Nifty could aim for 23,750.”
As we approach the Union Budget session, it is expected that the market will see fluctuations and increased volatility. Investors are advised to implement a focused, stock-centric strategy by carefully evaluating individual stocks rather than trying to time broader market movements, according to Osho Krishnan, Sr. Analyst, Technical & Derivatives of Angel One.
Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services Ltd., noted that FPIs have sold off Rs 81,600 crore worth of Indian equities in January so far, marking the second-largest monthly outflow on record after October 24. This was attributed to elevated US Treasury yields and lackluster domestic earnings deterring foreign investors.
Investors will closely monitor Budget-related developments, with a focus on capex and consumption-linked sectors. Key quarterly results expected to be announced on Friday include Sun Pharma, ONGC, Nestle, Vedanta, and IndusInd Bank, among others.
Nuvama recommended long positions in Axis Bank, HDFC Bank, Kotak Bank (with IIB as a hedge), as well as Industrials like Polycab, Siemens, and Havells. In the auto sector, Hero MotoCorp was considered a strong long, while Eicher was viewed as a relative short. IT remained their top short bet. Small and Midcaps were predicted to underperform unless stronger HNI participation emerged.
On the global front, Asian markets provided mixed cues, while US stocks closed in the green overnight.
Published on January 31, 2025.
