The Nifty50 index has been showing a consistent pattern of gains in the weeks leading up to Diwali, challenging popular beliefs about market behavior during the festive season. A comprehensive analysis of data from 2015 to 2024 reveals interesting trends that could reshape investors' perspectives on Diwali-related market movements.

Pre-Diwali Performance

The analysis shows that the Nifty50 has delivered positive returns in six out of ten weeks preceding Diwali over the past decade. Here's a breakdown of the pre-Diwali performance:

Post-Diwali Resilience

Contrary to the popular belief of post-Diwali declines, the week following Diwali has also shown positive performance:

Notably, both 2020 and 2022, which saw the strongest pre-Diwali rallies, were followed by positive post-Diwali returns, further challenging the myth of post-festive pullbacks.

Factors Supporting Market Stability

Analysts attribute the lack of sharp post-festive declines to several structural supports:

1. Steady SIP (Systematic Investment Plan) inflows
2. Improving corporate earnings
3. Policy continuity

Bullish Outlook from Brokerages

Several brokerages have expressed optimism about the Nifty50's future performance:

Valuation and Growth Projections

The Nifty50's forward P/E has normalized to below 21x, indicating a potentially attractive valuation. Analysts are projecting an acceleration in earnings growth:

The growth is expected to be led by sectors such as Financials, Autos, Capital Goods, and Consumption.

Conclusion

The analysis of Nifty50's performance around Diwali challenges long-held beliefs about market behavior during the festive season. With consistent pre-Diwali gains and post-festival resilience, investors may need to reassess their strategies and expectations for this period. The positive outlook from brokerages and projected earnings growth suggest a potentially strong future for the index, though investors should always consider multiple factors and conduct thorough research before making investment decisions.

The Nifty50 index experienced a volatile trading session on Tuesday, marking the first Tuesday weekly expiry since the National Stock Exchange (NSE) shifted its Futures and Options (F&O) contracts from Thursdays. The benchmark index closed at 24,579, down 45 points from the previous session.

Market Movements

The day began on a positive note, with the Nifty50 opening higher and reaching an intraday peak of 24,756. However, the market sentiment shifted dramatically after 12:45 pm, resulting in a sharp reversal. The index plummeted 234 points from its day's high, highlighting the increased volatility in the market.

Sector Performance

Defensive Fast-Moving Consumer Goods (FMCG) stocks showed resilience amid the market turbulence. Notable gainers included:

• Tata Consumer
• Nestle
• PowerGrid

On the other hand, several stocks lagged behind:

• Dr. Reddy's
• Mahindra & Mahindra (M&M)
• ICICI Bank

Broader Market Outperformance

Despite the decline in the Nifty50, broader markets demonstrated strength:

• Nifty Midcap 100 index rose by 0.27%
• Nifty Smallcap 100 index gained 0.53%

This outperformance of mid and small-cap stocks suggests that investors are finding opportunities beyond the large-cap space.

Sugar Stocks in Focus

Sugar stocks garnered attention following two significant developments:

1. The government lifted caps on ethanol production
2. The Supreme Court cleared the rollout of E20 (20% ethanol-blended petrol)

These policy changes are likely to have positive implications for the sugar industry and related stocks.

Institutional Activity

The market witnessed divergent behavior from institutional investors:

• Foreign investors continued to be net sellers
• Domestic institutions provided support to the market

This contrast in institutional activity highlights the current mixed sentiment in the Indian equity markets.

Technical Outlook

Market analysts suggest that the Nifty50 remains in a 'sell-on-rally' mode. Key levels to watch include:

Analysts expect the 24,300-24,200 range to hold amid ongoing market volatility.

As the market adapts to the new Tuesday expiry for F&O contracts, investors and traders should remain cautious and vigilant in this period of heightened volatility.