Amid strong optimism in the market, Nifty50 has surpassed the 19,900 mark, but many are eagerly awaiting the next big target – the magical 20,000 figure.
In just 15 sessions, the NSE flagship index has rallied nearly 900 points from the 19,000 level, hit on June 28, on strong global market cues, signs of an end to the US Federal Reserve’s rate tightening cycle, and most importantly, strong foreign investor inflows. The ongoing earnings season on Dalal Street is also supporting the bulls.
But the question on everyone’s mind is how much higher can this bull run take Nifty50.
The current uptrend in the Nifty is undeniably strong, and there is a possibility that it may surpass the 20,000 mark by the end of this month, said Santosh Meena, Head of Research, Swastika Investmart. He believes if Nifty manages to sustain above 19,800, it could potentially reach not just 20,000 but even 20,200.
Although, from a technical point of view, Nifty is showing signs of an overbought scenario, analysts have pointed out.
“In July, the Nifty index has already surged over 650 points (nearly 3% to date) and is now eyeing the 20,000 mark. We have witnessed an overbought scenario, but the bulls are being resilient to let loose their grip on the markets, which certainly showcases their dominance,” Osho Krishan, Sr Analyst – Technical & Derivative Research, Angel One, told ETMarkets.
“The immediate hurdle for the Nifty50 lies in the range of 19,850-19,900 before it reaches the much-anticipated 20,000 mark. We would advise staying light on positions as we head into uncharted territory with overbought conditions and taking a pragmatic approach while reaching the milestone of 20,000,” Krishan added with a note of caution.
Which stocks may emerge heroes for Nifty?
Rupak De, Senior Technical Analyst, LKP Securities, said with the current bullish sentiment in the market, it seems very likely that the index will reach this milestone soon.
“The recent rally was driven by IT, oil and gas, and banks, which took the Nifty from 19,000 to 19,800. In the next leg of the rally, banking, infrastructure, and oil and gas should lead from the front, as their charts look very bullish,” the LKP analyst added.
In the last month, the Nifty IT index has rallied over 7%, while from April lows, it has surged 18% with easing odds of a recession in the US and the emergence of artificial intelligence as a potential new source of revenue driving a rebound in their stocks.
Nifty Bank index, on the other hand, has risen over 5% thanks to strong buying from FIIs. The foreign investors have added equities worth Rs 7,050 crore in the financial services sector in the first half of this month after buying Rs 19,229 crore worth of shares in June.
Banking and IT stocks form a large part of the Nifty50 weightage.
“Banking stocks look promising in the near term, with majors like ICICI Bank, Axis Bank, and Kotak Bank expected to lead. Apart from banking, IT stocks like HCLTech and Wipro are expected to continue with the ongoing momentum. As these two sectors contribute the most to Nifty, we expect Nifty pullbacks to be bought into and the index eventually moving towards 21,000,” Anand James, Chief Market Strategist at Geojit Financial Services told ETMarkets. He also advised watching out for index heavyweight Reliance Industries, which commands a 10% weightage in the Nifty50.
Trading strategy if Nifty breaches 20,000
We are positive about seeing Nifty in the 20,600-21,000 band soon, but there is a fair chance of volatility increasing, said James, adding that this should be seen as opportunities for portfolio adjustment.
Santosh Meena of Swastika Investmart believes the current market conditions appear to be more favorable for a buy-and-hold strategy.
“Chasing 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,” Meena said.
Angel One analyst, however, cautioned investors and said that even if we achieve the milestone of 20,000, we should not rule out the possibility of a healthy profit booking in the indices.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)