Last week on July 20, the benchmark index Nifty50 hit its record high of 19,991.85, shy of less than 10 points from its important psychological mark of 20,000. Since hitting its latest all-time high on Thursday, the index has been in the red for 2 consecutive sessions on July 21 and July 24 (Friday and Monday). However, experts see the index hitting the 20,000 mark in the near term.
However, experts cautioned that even though 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.
Nifty Trend
The index has surged 21.6 percent from its 52-week low of 16,438.75, hit in March 2023 to hit its new peak of 19,991.85.
The Nifty has surged 18 percent in the last 1 year and 9 percent in 2023 YTD. It has added 2.8 percent in July so far, extending gains for the fifth straight month. The index advanced 3.5 percent, 2.6 percent and 4 percent in June, May and April, respectively. Meanwhile, in March, it was flat but still in the green, up 0.3 percent. However, the index shed 2 and 2.5 percent, respectively in Feb and Jan 2023.
Constituents
Only 7 stocks in the Nifty50 index have been in the red in 2023 so far while the remaining 43 have given positive reviews.
Tata Motors has been the top performer this year, up almost 63 percent followed by ITC, up around 44 percent. Meanwhile, Bajaj Auto, Dr Reddy's, L&T, M&M, BPCL, UltraTech Cement, NTPC, IndusInd Bank, ONGC, Nestle, Apollo Hospitals, PowerGrid, Maruti, HDFC Life, Britannia, Bajaj Finance, Tech Mahindra, and Asian Paints rose over 15 percent each in 2023 YTD. However, Adani Enterprises shed the most, down 37 percent followed by Infosys and UPL, down 11 percent each. RIL, Cipla, Hindalco, and Adani Ports also lost between 2-10 percent each this year.
Outlook Ahead
Fundamental Views
Santosh Meena, Head of Research, Swastika Investmart believes that the current uptrend in the Nifty is undeniably strong, and there is a possibility that it may surpass the 20,000 mark soon. However, it warned of minor corrections ahead.
"Following a robust surge in IT stocks from lower levels, there is a possibility that HDFC Bank, ICICI Bank, and L&T could take leadership and gain momentum in the near future. These stocks have the potential to catch up and make significant strides. The current market conditions appear to be more favorable for buy-and-hold traders rather than day traders. Chasing after a rapid upward movement can be challenging, as it may lead to missed opportunities or increased risk. However, it is important to maintain a bullish perspective as we are currently in a long-term structural bull market. In such a market, every dip or consolidation can be seen as a potential buying opportunity. Investors with a long-term outlook should consider utilizing these moments of temporary price declines to accumulate positions in stocks or other assets they believe in. By adopting a buy-and-hold strategy, investors can take advantage of the overall upward trend and potentially benefit from the market's long-term growth potential," it advised.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services noted that the near-term market trend will be influenced by a host of factors like the recent Q1 results, some major results expected this week, and policy decisions like the Fed meeting outcome on Wednesday.
The Fed is likely to raise rates by 25 bp on Wednesday, but the market movement will be decided by the commentary of the Fed chief regarding future inflation and rate trends. Investors may wait and watch these events unfold, he suggested. However, the relentless FPI flows, which are overwhelming everything else now, have the potential to take the Nifty to 20,000 level soon. Nifty Bank can provide support to the rally, he added.
Investors should keep in mind the fact that at the current Nifty PE of above 20 based on FY24 estimated earnings, there is no valuation comfort in the market. Barring the US, India is the most expensive market in the world now. At high valuations, some negative triggers can lead to a sharp correction. But in the near-term the party may continue, said the expert.
Ajit Mishra, SVP - Technical Research, Religare Broking expects Nifty to spend some time around the current levels, to digest the recent surge and it would be healthy. Meanwhile, participants should focus more on risk management for the existing trades and prefer sectors that are showing resilience for fresh positions. Among the key sectors, banking and financials still looks promising for further up moves while the crack in the IT pack has delayed its reversal so plan accordingly, he noted.
Technical View
Santosh Meena of Swatika: While the markets have hit multiple peaks, it's worth noting that certain short-term technical and derivative indicators are approaching overbought levels, which suggests that a minor correction or consolidation could occur, it warned.
In this context, it is important to consider that 19,800 is a critical resistance level that needs to be overcome for further upside potential. If the Nifty manages to sustain above this level, it could potentially reach 20,000 and even 20,200. Conversely, on the downside, 19,500 is a significant support level that is likely to provide strong backing in case of any downward movement.
Rupak De, Senior Technical analyst at LKP Securities: Nifty, the headline Indian Index, recently reached a fresh all-time high, stopping just 9 points shy of the 20,000 mark. The index'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 at 19,800, which could attract buying interest during potential pullbacks.
Arvinder Singh Nanda, Senior Vice President, of Master Capital Services: The Nifty index extended its winning streak for the fourth consecutive week to form a fresh all-time high at 19,991.85. The significant surge in prices has been attributed to substantial buying activity by FIIs, who injected ₹4766.40 crore into the cash segment, and improved global sentiments. The Nifty prices seem poised to continue their upward trajectory toward the levels of 20,100 and 20,300. In the event of any correctional fall, approximately around the 19,550 mark, it may present an opportunity to initiate fresh long positions. It is worth noting that a short-term reversal in the bullish trend will only occur if prices drop below the crucial support level of 19,480, which is in the vicinity of rising trend line support on the hourly chart.
