21,000 @ Diwali? The Nifty 50 index hit the 20,000-mark milestone in intra-day deals this week and is on track to hit 21,000 levels in the next two months (by Diwali) – analysts predict.
The 50-share index rallied 1,000 points in less than three months after hitting 19,000 marks on June 28, 2023.
The benchmark index surged 10 per cent in the calendar year 2023 and 11.5% in the last one year, while it rebounded 18% from this year’s low of 16,945 points touched on March 24, 2023. The recent rally in the equity market can be attributed to sustained foreign capital inflows amid improved domestic macroeconomic conditions.
Will Nifty Hit 21,000 By Diwali?
Analysts believe that the Nifty 50 index can cross the 21,000 mark by registering a growth of 5 per cent from the current level in the next two months i.e. by Diwali. However, they also say that the market will see some correction and suggest ‘buy at dip’ strategy for investors.
Rahul Sharma, Director and Head of Derivatives Research, JM Financial Services, said, ‘The last few days are evidence of softness in the bull market. The good thing is that stocks of information technology (IT), capital goods and public sector enterprises (PSEs) are showing better performance. BFSI stocks, which were under most pressure, are again seen in positive condition. We are on track to reach 20,432 on Nifty this month and 21,000 by Diwali.
Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities says Nifty has enough room for further expansion especially given that we are entering an election year, the room for upside is wide open.
“Nifty crossed the psychologically important mark of 20,000 points on September 11. With a breach of this important resistance level, we believe that the next target to look forward to in Nifty is 21,500, which is 3,000 points from the main breakout level of 18,500. Despite the markets hitting new all-time high the valuations are still reasonable. Nifty’s trailing twelve months PE is at 22.39 which is slightly above its long-term median of 20.62,” he says.
According to Sheth, it is notable that the sectors which pushed the Nifty up till 20,000 may not be the same which will push it to 21,500. “Nifty may have hit an all-time high but not all the sectoral indices have followed it… Bank Nifty is also trading at a relatively cheap valuation. Thus, Banks and IT could be the sectors which may take the index higher from the current level.”
Neeraj Chadawar, Head – Quantitative Equity Research, Axis Securities, said: ” In base case, the Indian economy stands at a sweet spot of growth and remains the land of stability against the backdrop of a volatile global economy. We continue to believe in the long-term growth story of the Indian equity market, supported by the emerging favourable structure, as increasing Capex enables banks to improve credit growth. Strong earnings trajectory continues in the NIFTY 50 universe. We foresee NIFTY EPS to post growth of 17 per cent/13 per cent in FY 24/25. Post Q1FY24, we have made marginal upgrades of 0.9 per cent/0.8 per cent to our FY24/25 EPS expectations. Thus, we maintain our base case Dec’23 Nifty target at 20,200 by valuing it at 20x Dec’24 earnings.”
“Whereas, in a bull case, we value NIFTY at 22x, which translates into a Dec’23 target of 22,200. Our bull case assumption is based on the overall reduction in volatility and the success of a soft landing in the US market. Currently, we are near the peak of the rate hike cycle and may expect only one rate hike in the US market before the US Federal Reserve takes a pause. If the market sails through the next quarter smoothly, we will likely see the next level of triggers and money flowing to EMs. This, in turn, would increase the market multiple,” he said.
“Further, the direction of US 10-year bond yields, the dollar index, and the Brent crude remains critical. Adding to that, In March ’23, 33% of the stocks were trading above the 200-day moving average, indicating that the market was in the oversold zone. The market has since recovered significantly, with 90 per cent of the stocks now trading above the 200-day moving average on 11th Sep’23, which indicates it is near the overbought zone. From here, the market will likely see a style and sector rotation. With the strong catch-up by midcaps and smallcaps in the last couple of months, we believe that the margin of safety at current levels has reduced compared to Largecaps. With this view, the broader market may see some time correction in the near term while flows will likely shift to large caps,” he explained.
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