• The Indian stock market started the week with declines in auto, IT, PSU Bank, pharma, and metal sectors.
• Despite the initial dip, 1,170 stocks were trading in green on the National Stock Exchange (NSE).
• Market volatility is attributed to huge positions in F&O segments, with massive short covering indicated by a 500 point move in the Nifty.
• Despite the slump, the market trend remains positive, with traders advised to adjust their positions and consider a hedged approach.

The Indian stock market began the week on a sluggish note, with significant declines in the auto, IT, PSU Bank, pharma, and metal sectors. The Sensex was trading at 81,876.95, a decrease of 256.17 points or 0.31 per cent, while the Nifty was trading at 24,705.60, a drop of 62.70 points or 0.25 per cent around 9:32 am. Despite the initial dip, the market trend remained positive with 1,170 stocks trading in green on the National Stock Exchange (NSE), while 571 stocks were in red.

Akshay Chinchalkar of Axis Securities noted that the Nifty experienced a slump during the early part of the session on the previous Friday. However, the day's low occurred exactly at the falling neckline of the bullish head-and-shoulders pattern, which was activated on December 3 with an upside objective of 25,500. This objective remains valid as long as the market stays above 23,873, but more critical support now is the Friday low of 24,180.

The Nifty Bank was down 168 points or 0.31 per cent at 53,415.80. The Nifty Midcap 100 index was trading at 59,234.85 after rising 243.30 points or 0.41 per cent. The Nifty Smallcap 100 index was at 19,515.40 after rising 108.10 points or 0.56 per cent.

Market Volatility and Sectoral Performance

Market experts attribute the heightened volatility in the market to the huge positions in F&O segments. The 500 point move in the nifty from the day's trough to the peak indicates massive short covering. In the Sensex pack, NTPC, JSW Steel, M&M, Titan, Kotak Mahindra Bank, Infosys, TCS, Hindustan Unilever Limited, Axis Bank and Tech Mahindra were the top losers. Tata Steel, UltraTech Cement, L&T, ITC, Tata Motors, IndusInd Bank and HCL Tech were the top gainers.

In the Asian markets, except China, the markets of Hong Kong, Bangkok, Seoul, Jakarta and Japan were trading in red. In the US stock markets, the Nasdaq Composite ended 0.12 per cent higher and Dow Jones Industrial Average ended 0.20 per cent down on the previous trading session. Foreign institutional investors (FIIs) bought equities worth Rs 2,335.32 crore on December 13, while domestic institutional investors sold equities worth Rs 732.20 crore on the same day.

Historical Trends and Market Predictions

Historically, the Indian stock market has seen similar trends. For instance, on November 28, 2024, the fall was limited to the Index stocks only, resulting in an outperformance by the Mid and Smallcaps segments. On October 7, 2024, barring IT, all the other sectors ended the day in red with Media and PSU Banks being the major laggards. Underperformance was extended by the Broader markets as Mid and Smallcaps fell by 2.01% & 2.75% respectively.

The ongoing geopolitical tensions have driven crude prices higher, dampening hopes for a rate cut by the RBI in the upcoming policy meeting. Additionally, noticeable selling by foreign investors is adding to the market's strain. While there may be a pause or slight rebound after the recent slide, the overall bias will remain negative unless Nifty decisively reclaims the 25,600 level. Key sectors such as IT, metal, and pharma are showing resilience, while others are facing selling pressure during rallies. Traders should adjust their positions accordingly and consider adopting a hedged approach.