Nifty hits record high: Can bulls on Dalal Street keep the rally going?

By Koustav Das: It has been a good day for investors on Dalal Street as the benchmark indices, S&P BSE Sensex and NSE Nifty 50, hit fresh all-time highs, supported by positive developments in both domestic and global arenas.

Strong global cues, positive domestic developments, sustained foreign inflows, and robust macroeconomic data (easing inflation and strong GDP growth projections) are key factors behind the stock market’s dream rally.

At around 11:55 am, the Sensex was trading at 931.44 points or 1.81 percent higher at 63,901.44, while the NSE Nifty 50 inched closer to 19,000 after gaining nearly 280 points. This marks one of the strongest rallies Dalal Street has witnessed in more than a month.

Also Read | Sensex hits all-time high, Nifty registers record close

However, it is worth noting that there was a sharp correction after the market benchmarks hit their previous peaks in December 2022. A sharp sell-off till March saw the markets correct nearly 10 percent since achieving the peak last year.

But the bulls seem to have taken over control again, and as the markets continue to rally, investors just have one question: Will the dream rally continue?

Experts bullish on market rally

Stock market analysts and experts are cautiously positive at the moment, outlining both the positives and negatives that could impact market activity going forward.

Swapnil Shah, Director of Research, StoxBox, said, “After a long wait and a hide-and-seek, markets were finally able to cross previous all-time-highs, and the Nifty 50 moved beyond the crucial 18,900 levels for the first time in history.”

“We believe that markets gathered momentum on the back of positive news flows surrounding the HDFC-HDFC Bank merger and robust current account deficit data for the fourth quarter. Moreover, yesterday’s strong economic data in the US helped reduce market fears of an imminent recession in the world’s largest economy following a very hawkish stance by the US Federal Reserve,” he added.

Going forward, Shah believes that a “rapid and widespread progress of the monsoon, albeit with a delay, should keep investors interested in the markets in the short term.” He also highlighted that the first-quarter earnings are around the corner and will lead to “stock-specific action” based on the performance of companies.

“We expect autos, FMCG, and financial sectors to continue their earnings traction and support indices at higher levels. The only conundrum at this point in time is the global geopolitical situation and the further tightening of interest rates by major global central banks,” Shah said.

On the technical side, Shah said, “The Nifty 50 index marked new life highs following a tighter volatility compression at the back of 20 DEMA currently trading at 18,669, now making the average line a crucial support going forward.”

“We anticipate the drawdowns to be limited to 18,600 levels, whereas 19,200 is on the upside, provided there is a decisive weekly closing above 18,900.”

‘Dream run may continue’

Jatin Gohil, Technical and Derivative Research Analyst at Reliance Securities Limited, believes the dream run may continue, potentially pushing the Nifty to levels between 19,500-19,900 or even 20,100 in the medium term.

Gohil noted that since April 2023, the broader market has been favoring the bulls, with key mid-cap and small-cap indices outperforming the benchmark Nifty.

He mentioned that certain indices are in uncharted territory, and others may soon join the upward trend. The rally has been supported by strength in the rate-sensitive, defensive, and metal sectors.

Gohil concluded by saying that the positive momentum is likely to persist. In terms of sector-specific stocks, he emphasized that the IT sector currently offers the best risk-reward profile, with stocks like HCL Technologies and Tech Mahindra poised for a fresh up-move after a corrective phase.

Om Mehra, a research analyst at Choice, reported mixed positive results from Q4’s earnings, which boosted investor confidence and led to incremental gains in stock prices. “Over the past four months, foreign institutional investors (FIIs) have been net buyers, with investments exceeding Rs 44,000 crores. Despite India hosting the G20 summit, there has been a significant global inflow of funds,” he added.

“Technically, the benchmark indices’ formation of higher highs and higher lows on the monthly chart remains intact unless it closes below 16,828. Mehra indicated that a longer-term horizon suggests the Index could test levels of 19,700-19,800, while Bank Nifty’s next target is expected to be between 47,000-48,000 by year-end,” Mehra said.

V.L.A. Ambala, a SEBI Registered Research Analyst at Stock Market Today (SMT), highlighted that the current bull run in the market differs from previous ones.

While many investors panicked when prices declined after reaching previous all-time highs, Ambala noted that this time the prices are sustaining.

She expressed a high probability of witnessing a breakout, citing both technical and fundamental indicators pointing toward a sustained bullish run. Ambala firmly believes that this bull run is likely to sustain in the future.

Stay invested, avoid panic reactions

Samveg Patel, Associate Professor and Area Chairperson – Finance at the School of Business Management, NMIMS Mumbai, attributed the strong market rally to positive sentiment on Dalal Street, driven by capital infusion from foreign and domestic institutional investors, favorable quarterly results, and positive spillover effects from leading global indices.

Patel advised investors to remain invested in the market and take advantage of the expected larger bull run in the coming days.

Mayank Joshipura, Associate Dean of the Research & PhD program and Professor of Finance at the School of Business Management, NMIMS Mumbai, mentioned that although Nifty’s record high holds sentimental value, it is ultimately just a number.

He emphasized that the key lesson for the investor community is that equity investing is more about time in the market than timing the market. Despite concerns about global inflation, the Russia-Ukraine war, banking crises in the EU and USA, high bond yields, and frequent recession warnings, the markets have reached new highs and will continue to do so in the future.

Joshipura advised investors not to panic or overanalyze when confronted with bad news. Instead, they should focus on following a well-defined asset allocation strategy aligned with their risk profile, maintain a diversified basket of equity portfolios, and allow the power of compounding to work over time.

Om Mehra from Choice concurred with this approach and recommended that long-term investors build their portfolios with high-quality stocks. He also suggested considering exchange-traded funds (ETFs) as an additional option during modest corrections in the market index.

Gaurav Bissa, VP at InCred Equities, mentioned that the Nifty is anticipated to face a hurdle around the 19,000 level, which has seen significant call option writing in recent weeks. He added that immediate support stands at 16,650, where the previous swing low and the 21-day exponential moving average (21ema) are located.

Also Read | Sensex hits all-time high: Will the dream run continue?

(Note: This article provides insights from stock market analysts and does not reflect the official stance of India Today. Readers are advised to consult experts before making any investment decisions in stocks and other commodities.)