Broader market indices ended their longest winning streak of 2024 on Wednesday as they fell for the first time in 10 sessions due to profit booking. The BSE Midcap index fell 0.9% and the BSE Smallcap index ended 0.6% lower, after hitting fresh lifetime highs intraday.
This is the first time that the broader market indices have ended a day in the red after the sharp decline seen on June 4, which indicates rising investor confidence about the political and policy stability under the new coalition government.
The BSE Smallcap index, which had slid 6.8% on June 4 due to the unexpected election outcome, has surged 15% in the nine sessions, marking a tremendous recovery rally. A similar trend was also seen in the midcap index.
While the sharp bounce-back has shown the resilience of the Indian market, it has also raised valuation concerns. Experts believe any negative news could trigger a kneejerk reaction from the current levels.
Analysts feel that given that market has factored in policy continuity, the Budget will be very crucial.
Shrikant Chouhan, executive VP and head of equities at Kotak Securities, said the broader market can see up to 5% correction ahead of the Budget next month as valuations are over-stretched currently. He also expects some correction in the benchmark indices over the next one month, but does not see the Nifty falling below 23,000 level.
On Wednesday, the Nifty fell 41.9 points or 0.2% to close at 23,516 points, snapping a five-day winning streak. On the other hand, the Sensex rose 0.1% to 77,337.59 points.
Sunny Agrawal, head of fundamental equity research at SBICAPS Securities, highlighted that the banking sector continued to hold the fort even as the rest of the sectors witnessed profit taking after the strong post-election rally.
The Nifty Bank index jumped 2% on Wednesday and was among the sectoral indices that ended the day in the green. Moreover, the top five gainers on the Nifty and Sensex were all private banks.
“Overall, it seems that sector rotation may continue for the next few weeks ahead of the budget. Key benchmark indices may continue to trade in narrow range,” Agrawal said.