On Thursday, August 1, 2024, both the Sensex and Nifty hit fresh record highs, with the Nifty surpassing the 25,000-point threshold for the first time. This surge followed a global rally spurred by U.S. Federal Reserve Chair Jerome Powell’s suggestion of a potential interest rate cut in September.
Market View
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, commented, “The Fed chief signalling a possible rate cut in September is positive for global equity markets. More important, his comments that the US economy is normalising is a shot in the arm for bulls. The dip in the 10-year US bond yield to 4.05 is sharp and this may halt and perhaps may even reverse the FII selling in the cash market in recent days.”
Nifty 50 Prediction
Nifty 50 index continued its up move with range bound action on July 31 and closed the day higher by 93 points. According to Rupak De, Senior Technical Analyst, LKP Securities, “Nifty 50 remained strong throughout the day as put writers were seen shifting their positions to 24,900. On the hourly chart, the index has given a consolidation breakout. The RSI is in a bullish crossover on both the hourly and daily timeframes. A fresh leg of bullishness starts above 25,000, while support is placed at 24,900. If the index falls below this level, it might correct down towards 24,750.”
Bank Nifty Prediction
Bank Nifty index rose 54.10 points, or 0.11%, to close Wednesday’s volatile session at 51,553.40. According to De, “Bank Nifty remained rangebound ahead of the US Federal Reserve meeting on the rate decision. So far, the index has stayed below the 21-EMA (Exponential Moving Average). On the other hand, the daily RSI has entered a bullish crossover. A sustained trade above 51,600 might induce a rally towards 52,000 – 52,200. On the lower end, support for Bank Nifty is placed at 51,200 – 51,000.”
What’s Driving the Rally?
Analysts attribute the ongoing rally to a combination of factors, including:
- Positive Global Cues: The global markets have been trending upwards, with the US markets hitting new highs. This has rubbed off on the Indian markets, with foreign investors continuing to pour money into the country.
- Earnings Season: The ongoing earnings season has seen most companies report better-than-expected numbers, which has boosted investor sentiment.
- Government Initiatives: The government’s efforts to boost economic growth, including the recent announcement of a stimulus package, have been well-received by the market.
- Monsoon Update: The monsoon season has been progressing well, which is expected to boost agricultural output and rural demand.
Sectoral Performance
The rally was broad-based, with most sectors participating in the gains. The top gainers included:
- Banking: HDFC Bank, Kotak Bank, and Bajaj Finance were among the top gainers, rising up to 2.42%.
- Consumer Durables: This sector was another major gainer, with its index rising 261 points.
- Capital Goods: The Capital Goods sector also saw significant gains, with its index rising 380 points.
- PSU Bank: PSU Bank index led the gains with a rally of 2.25% among the other sectoral indices.
- Media: Media index was another top gainer, rising significantly.
- Realty: Realty index also saw gains, rising up to 2.25%.
The rally was broad-based, with most sectors participating in the gains. However, some sectors did not fare well. The top losers included:
- Walgreens: The drug store chain was the worst-performing company on the S&P 500, with its share price halving and hitting its lowest level since the mid-1990s.
- Lululemon: The high-end athletic wear firm was the second-worst-performing stock year-to-date on the S&P, with analysts expecting the retailer to post its worst annual revenue growth since 2007.
- Discovery: The media conglomerate was among the top losers, with negative headlines driving down its stock.
- Paramount Global: The entertainment conglomerate was also among the top losers, with shaky balance sheets and negative headlines affecting its stock.
- Aerovate Therapeutics: The drugmaker was the worst-performing stock on the Russell 3000, with its market cap plummeting from over $600 million to below $50 million this year due to a “worst-case scenario” in which its only product, a blood pressure treatment, was pulled from testing.
- Rivian: The electric vehicle maker was among the worst performers on the Russell 3000, with a market value over $10 billion, reporting its 11th consecutive quarter of more than $1 billion worth of cash burning.
- Intel: The semiconductor chip company was a surprising loser, considering rival Nvidia and other silicon chip companies are among the best-returning investments this year.
- Boeing: The U.S.’ largest plane manufacturer was also among the top losers, with returns on investments looking relatively grim.
- CDW Corporation: The company’s stock was among the top losers, with a significant decline in its share price.
- Ferrovial SE: The Spanish multinational infrastructure operator’s stock was also among the top losers, with a significant decline in its share price.
- Axos Financial, Inc.: The financial services company’s stock was among the top losers, with a significant decline in its share price.
- Freshworks Inc.: The software company’s stock was among the top losers, with a significant decline in its share price.
What Do Analysts Expect?
Analysts expect the market to continue its upward trajectory in the near term, driven by the positive factors mentioned above. However, they also caution that the market may face some volatility in the short term due to various global and domestic factors.
Analyst Expectations:
- The Fed chief signaling a possible rate cut in September is positive for global equity markets.
- The dip in the 10-year US bond yield to 4.05 is sharp and may halt and perhaps even reverse the FII selling in the cash market in recent days.
- If both FIIs and DIIs turn buyers, the market can spurt, but sustaining the rally would be difficult since valuations are getting stretched.
- Nifty can find support at 24,950, followed by 24,900 and 24,850. On the higher side, 25,100 can be an immediate resistance, followed by 25,200 and 25,250.
- Bank Nifty is expected to remain rangebound, with a sustained trade above 51,600 inducing a rally towards 52,000 – 52,200. Support for Bank Nifty is placed at 51,200 – 51,000.
Investment Strategy:
- Hold positions with a trailing stop-loss.
- Invest in high-quality companies with strong earnings visibility over a 12–18-month horizon.
- Defensive sectors like non-banking financial companies (NBFCs), telecom, consumption, IT, and pharmaceuticals are expected to be relatively safer in the near term.
In conclusion, the Indian stock market continues to trend upwards, driven by a combination of positive factors. While analysts expect the market to remain volatile in the short term, they remain positive on the market in the medium to long term. Investors are advised to remain cautious and focus on investing in quality stocks and sectors.
FAQ’s
- Q: What is the current status of the Indian stock market? A: The Indian stock market benchmarks, Sensex and Nifty 50, have hit fresh record highs, with the Sensex reaching 80,898.3 and the Nifty 50 scaling 24,661.25.
- Q: What are the factors driving the market’s upward trend? A: The market is driven by optimism about a growth-oriented Union Budget, expectations of healthy Q1 earnings of Indian corporates, and the steady progress of the monsoon.
- Q: What are the concerns limiting the market’s gains? A: Concerns over high market valuations are limiting the market’s gains, with most variables already discounted in the market.
- Q: What do analysts expect from the market? A: Analysts expect the market to remain rangebound ahead of the Budget announcement, with few fresh triggers. They believe the market can see a decisive move only after the Budget is presented.
- Q: What are the sectoral performances? A: Nifty Realty, FMCG, and IT ended with decent gains, while Nifty Bank, PSU Bank, and Private Bank indices ended lower.
- Q: What are the technical views on Nifty 50? A: According to technical analysts, for the bulls, 24,665/80,900 would be the immediate breakout level. Above this, the market could rally to 24,750-24,775/81,200-81,300.
