Indian benchmark indices surged to new record highs in Thursday's trade, driven by favorable domestic and global factors. Over the past two weeks, the Nifty 50 and S&P BSE Sensex have been consistently setting new all-time highs, reflecting the ongoing momentum in the market.
The Nifty 50 crossed the 19,900 level for the first time, coming tantalizingly close to the significant 20,000 mark, while the Sensex soared to the 67,600 level and remained on the edge of touching the 68,000 level.
In today's trading session, the Nifty 50 skyrocketed by 158 points, achieving a new record high of ₹19,991.85. It is now just 8.15 points away from the much-awaited 20,000 milestone. Similarly, the Sensex experienced a remarkable gain of 522 points, representing a surge of 0.77%, culminating in a fresh all-time high of 67,619.
The Nifty 50's impressive journey to this remarkable milestone took only 18 trading sessions, covering an astounding 1314 points, with just two sessions ending in the red. Notably, June 30 witnessed the biggest intraday gain for the Nifty 50, with an impressive rally of 1.14%. During this same period (18 trading sessions), the S&P BSE Sensex witnessed a stellar surge of 4,592 points.
The ongoing global market rally is primarily fueled by the strength of the US economy, which, up to this point, has displayed no indications of the recession that markets had feared and anticipated in 2022.
The US annual inflation rate fell to 3% in June 2023, the lowest rate in 2 years. During the same period last year, it was around 9.1%. Similarly, UK inflation also dropped sharply in June to 7.9%, marking the lowest level since March 2022.
Along with this, the strong earnings from recent corporate results from the US have been better than expected and have boosted the investor's confidence further.
Meanwhile, the Dollar Index bounced back above the 100 level, but it is still at a one year low due to drop US inflation. This has sparked hopes that the Federal Reserve might be reaching the end of its current monetary tightening cycle.
For context, the strength of the Dollar is closely linked to interest rates: when the US Federal Reserve raises rates, the dollar gains strength, and when it lowers rates, the dollar weakens.
On the technical front, Rupak De, Senior Technical analyst at LKP Securities, said," The Nifty 50's value remains above the critical moving average, indicating a positive trend. Furthermore, the RSI shows a bullish crossover, suggesting potential market strength."
"In the short term, the index is expected to stay positive. However, if it fails to surpass the 20,000 level, investors might engage in profit-taking. There is a support level of 19,800, which could attract buying interest during potential pullbacks," he added.
Is profit-booking on the cards?
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said," Even when the market is scaling new highs and the undercurrent is positive, there are strong views that the current high valuations cannot be sustained for long. It is important to understand that the DIIs are not bullish about the market at the current elevated valuations. They were sellers in 12 out of the last 13 trading sessions and have cumulatively sold for ₹16,321 crore and may sell more at higher levels.
“In January and February, when the FIIs were selling, DIIs were consistent buyers. The 3000-point rally in Nifty from the March lows has given DIIs huge profits, and, therefore, profit booking would be a rational response. Selling and profit-booking at high levels are easy decisions, while buying at high prices can be risky,” he added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.