Sensex falls 500 pts from day's high, Nifty below 23,250: Key reasons behind markets paring gains

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Benchmark indices Sensex and Nifty pared their gains on November 2 due to various reasons, including profit booking.

At 1:16 pm, the Sensex was up 569.07 points or 0.76% at 75,028.60, and the Nifty was up 173.90 points or 0.75% at 23,227.00. About 2,540 shares advanced, 1,422 shares declined, and 178 shares were unchanged.

Key reasons behind markets paring gains

1) Profit booking

Markets saw profit booking after they rose for third straight day. Sensex fell 500 points from day's high while Nifty was trading below 23,250-mark.

An over 7% rise in index heavyweight Reliance Industries, which was the top gainer, pulled up the headline indices. India's largest coal producer, Coal India, also supported gains. On the other side of the trade, Infosys and ICICI Bank led declines.

Broader markets remained higher with small-cap and mid-cap indices rising around 1% each. Among sectoral indices, Nifty Media was down nearly 1% and was the major sectoral laggard.

In the Nifty 50, shares of ITC erased their earlier gains after rising to an over one-month high of Rs 269.30 apiece, up over 1%, ahead of its September quarter earnings. Shriram Finance was up over 5% and was among the top gainers in the index. Its peers, Jio Financial Services, Bajaj Finserv, and Bajaj Finance, were up 1–3%. However, SBI Life Insurance Co. and HDFC Life Insurance Co. fell around 1% each. Coal India was up nearly 5% after it reported a 19% on-year jump in its provisional coal production in October. A fall of 1% in index heavyweight ICICI Bank limited further gains in the 50-stock index.

Shares of Engineers India and Dixon Technologies (India) rose by nearly 14% and 12%, respectively, after their earnings for the September quarter.

2) Selling in IT shares

Selling in IT shares pulled down markets from day's high as the sectoral index rose for past two sessions.

3) Technical reason

Nifty needs to trade above 23,350 for further bullishness to emerge in the market, said analysts.

Technically, the Nifty bias is cautiously positive. Clearing 23,300 resistance targets 23,500. The 23,000 mark is a crucial pivot, with the undertone constructive above 22,800 support (a break exposes 22,500), said Hemang Gor, Senior Research Analyst – Derivatives & Technical Research, Axis Direct.

On the higher side, 23,175/74,800 would be the immediate resistance zone for the bulls. A successful breakout above this zone could push the indices towards 23,350/75,200. Further upside could extend the rally towards 23,500/75,500. On the flip side, a fall below the 20-day SMA, placed near 22,600 for the Nifty and 73,400 for the Sensex, would make the uptrend vulnerable. Below these levels, short-term traders may consider exiting their long positions, said Shrikant Chouhan, Head Equity Research, Kotak Neo.

"On the upside, immediate resistance is placed at 23,200, coinciding with a cluster of daily moving averages. A decisive breakout above this level could pave the way towards 23,700–24,000, where the 100-Week EMA and 200-Day EMA are positioned. On the downside, immediate support is seen at 22,850, followed by the crucial 22,600–22,400 zone, backed by the 200-Week EMA and rising trendline. Traders may adopt a selective buy-on-dips approach while monitoring these key levels, said Hitesh Tailor, Research Analyst, Choice Broking.