Nifty, Sensex end flat but midcap and smallcap indices record biggest single-day fall in 2023

• Midcaps and small caps see a sharp fall with 90% of stocks closing lower.
• Larsen and Tubro, TCS, Infosys and Divis Labs were the top gainers.
• BPCL, Power Grid and NTPC were the main laggards.

Benchmark Indian indices, the Sensex and the Nifty, witnessed a volatile day of trade on Tuesday. The markets opened at a record high but slipped sharply after that. However, after the first hour, a recovery was seen which allowed the Nifty to reclaim the 20,000 mark. At the close, the Sensex ended 94.05 points in the green to settle at 67,221.13 while the Nifty skid 3.15 points to close at 19,993.20.

The midcap and smallcap stocks took a massive beating with the former closing 1,273 points in the red which translates to a 3% fall. The midcap underperformance meant that the market breadth was in favour of declines and the NSE Advance-Decline ratio was at 1:8.

The markets showed first signs of cooling off after seven straight sessions of gains as key indices ended mixed in a session marked with volatility in early trades but turned range-bound thereafter, noted Shrikant Chouhan, Head of Research (Retail), Kotak Securities.

"Sluggishness in other Asian and European gauges also prompted investors to take a cautious route and resort to selective profit-taking. Technically, the medium term texture of the market is still positive, but in the near future we could see a range bound activity. For traders, 19900-19850 could be the key support levels while 20100-20150 could be the immediate resistance areas for the bulls," he said.

Larsen and Tubro, TCS, Infosys and Divis Labs were the top gainers while BPCL, Power Grid and NTPC were the main laggards.

Technically, the Nifty has formed a bullish candle on the daily charts and is consistently forming a higher high and higher low series formations on the intraday charts, which is largely positive, Chouhan pointed out.

“For trend-following traders, 19900-19850 would act as a key support level. Above that level, the index could move up to 20100-20175 in the near term and 20400-20500 in the medium term. On the flip side, traders may prefer to exit long positions if the index falls below 19800, and below the same, one could expect a quick intraday correction up to 19700-19650. If Nifty corrects till 19900 -19850 level then the strategy should be to buy Nifty. For this keep the stop loss at 19800. Between 20100 and 20400 levels, it is advisable to take partial profits on investments or reduce excessive investments in equities,” he elaborated.

The benchmark indices have added over 3% each, respectively over the past week, after India's economy grew firm in the April-June quarter.

The Indian economy has witnessed a firm GDP growth rate of 7.8% in the first quarter (April-June) of 2023-24 is likely to have improved investors’ sentiment lately. With a GDP growth of 7.8%, it continues to be the fastest-growing major economy.

For fresh cues, investors now await India's retail inflation data for August, due at 5.30 pm on Tuesday evening.