Beginning the article by referencing a renowned quotation from economist John Maynard Keynes: "Markets can stay irrational longer than you can stay solvent." For a robust market to attain unprecedented levels, it is imperative that it experiences periodic pullbacks to mitigate the risks associated with fragility, bubble formation, and overexuberance. The market has exhibited a unidirectional trend since late October, interrupted only by minor pullbacks, well in advance of the elections. Following the unprecedented election outcome, the market continued with its robust momentum. With the beginning of the new year, the momentum of the past three months appears to be diminishing, and market participants are beginning to book profits.

Institutional Research firm such as Kotak Institutional Equities and C-Suite at Pace 360 anticipate that the Indian market could decline by 20% by the end of 2024. During trading on New Year's Day, the Nifty developed a large Doji candlestick pattern and closed at 21740 after touching life time high of 21834. The subsequent trading day, Nifty made positive opening and witnessed formation of a long bearish candle with tails that persisted in its downward trajectory. The session closed around 21660 as the index encountered resistance from the previous day low of 21680, reflecting negative sentiments. As of today, January 3rd, the Nifty fell by around 100 points and formed a bearish candle with a long body and tails on both sides. On the daily and weekly RSI time frames, benchmarks such as the Nifty and Sensex have been trading above 70, indicating that the index is overbought and a potential downward reaction is imminent in near term. Also, the earning season is about to begin, with IT titans Infosys and TCS being the first to disclose their earnings.

The news that became headlines in today's session is the Supreme Court judgment on Adani Group and the India Manufacturing Purchasing Managers' Index.

1. Adani group hearing

The three-judge bench comprising Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra delivered the judgment after hearing a batch of pleas on the Hindenburg issue. Ahead of the ruling Adani Group stocks were up 10%, with the conglomerate's market capitalisation crossing the Rs 15 lakh crore mark. The Supreme Court said there is no ground to transfer the case to the CBI. Sebi had submitted its investigation report to the court in August after completing probe in 22 out of 24 cases relating to allegations against the Adani group. Thus, the court has asked SEBI to complete its probe into Hindenburg allegations in the next three months. Adani Energy Solutions was the top gainer, while Adani Total Gas and NDTV were up around 8-9% each.

The court said that the government and SEBI will look into infractions of the law, if any, by Hindenburg on short-selling and actions will be taken in accordance with the law. The apex court also said that the facts of the case do not warrant the transfer of the probe into the matter to a Special Investigation Team (SIT) or other probe agency.

2. India’s manufacturing PMI

India's manufacturing sector experienced an 18-month low in December, with the Purchasing Managers' Index (PMI) reporting an 18-month low but above the critical threshold of 50 mark at 54.9. Despite this dip, the index remained in an expansionary phase for the 30th consecutive month. The report highlights softer yet sharp increases in factory orders and output, with a strengthening business confidence towards the year-ahead outlook. Input costs rose at the second-slowest rate in nearly three-and-a-half years, contributing to charge inflation at a nine-month low. The uptick in international order receipts continued for the twenty-first consecutive month, with gains reported from clients in Asia, Europe, the Middle East, and North America.