21,000 @ Diwali? The Nifty 50 index reached the milestone of 20,000 points in intra-day deals this week and is on track to reach the 21,000 level in the next two months (by Diwali) – analysts estimate.
The 50-share index rose 1,000 points in less than three months after hitting 19,000 on June 28, 2023.
The benchmark index rose 10 percent in calendar year 2023 and 11.5% in the past year, while it jumped 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 improving domestic macroeconomic conditions.
Will Nifty reach 21,000 by Diwali?
Analysts believe that in the next two months i.e. by Diwali, the Nifty 50 index can register a rise of 5 percent from the current level and cross the figure of 21,000. However, he also says that the market will see some improvement and suggests a ‘buy on dip’ strategy for investors.
Rahul Sharma, director and head of derivatives research, at JM Financial Services, said, ‘The last few days are evidence of softness in the bull market. The good thing is that information technology (IT), capital goods and public sector enterprises (PSE) stocks are showing better performance. BFSI stocks, which were under maximum pressure, again seem to be in a positive position. We are on track to reach 20,432 on Nifty this month and 21,000 by Diwali.
Apoorva Sheth, Head of Market Perspectives and Research, SAMCO Securities, says there is enough room for further expansion in the Nifty, especially considering that we are entering an election year and the scope for upside is wide open.
“Nifty crossed the psychologically important mark of 20,000 on September 11. With the breach of this important resistance level, we believe the next target in Nifty is 21,500, which is 3,000 points from the main breakout level of 18,500. Valuations are still reasonable despite the market reaching all-time highs. The trailing twelve-month PE of Nifty stands at 22.39 which is slightly above its long-term average of 20.62,” he says.
According to Sheth, it is noteworthy that the sectors that had taken Nifty to 20,000 may not be the same that would push it to 21,500. “Nifty may have hit an all-time high, but not all sectoral indices have followed suit… Bank Nifty is also trading at relatively cheap valuations. Thus, banks and IT could be the sectors that can take the index above the current levels.’
Neeraj Chadawar, Head of Quantitative Equity Research, at Axis Securities, said: “In the base case, the Indian economy stands in a good place of growth and remains a land of stability against the backdrop of a volatile global economy. We continue to believe in this Keep.” The long-term growth story of the Indian equity market is supported by the emerging favorable structure, as increased capex helps banks improve credit growth. Strong earnings trajectory continues in the Nifty 50 universe. We expect Nifty to register EPS growth of 17 percent. 13 percent in FY 24/25. Following Q1FY24, we have made a modest upgrade to our FY24/25 EPS expectations by 0.9 percent/0.8 per cent. Thus, we maintain our base case Dec’23 Nifty target at 20,200. At 20x Dec’24 earnings.”
“While, in a bullish case, we value Nifty at 22x, which translates into a target of 22,200 for Dec’23. Our bull case sentiment is based on an 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 we can expect only one rate hike in the US market before the US Federal Reserve puts a halt to it. If the market moves smoothly in the next quarter, we are likely to see the next level of trigger and fund flows into emerging markets. This, in turn, will increase the market,” he said.
“Furthermore, the direction of the US 10-year bond yield, dollar index and Brent crude remain important. Furthermore, in March ’23, 33% of stocks were trading above the 200-day moving average, indicating that the market was in the oversold zone. The market has recovered significantly since then, with 90 percent of stocks now trading above the 200-day moving average on 11 Sep’23, which indicates it is close to the overbought zone. From here, the market will likely see a style and sector rotation. With midcaps and smallcaps holding strong over the past few months, we believe the margin of safety has narrowed at current levels compared to largecaps. “With this approach, the broader market may see a correction for some time in the near term, while flows are likely to shift to large caps,” he explained.
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