'It's advantage bulls for the near-term'

'New record for the Nifty50 is only a question of when.'

Despite the sharp up move in frontline indices -- the S&P BSE Sensex and the Nifty50 -- in the last few weeks, analysts believe there is more headroom available for them to move up, and it is just a matter of time before the S&P BSE Sensex and the Nifty50 hit a fresh all-time high.

The rally on Friday, November 11, 2022 that saw both these frontline indexes surge over 1.7 per cent in intraday deals was triggered by the lower-than-expected US consumer price inflation (CPI) print of 7.7 per cent for October, which rekindled hope that the US Federal Reserve (US Fed) may tone down its ultra-hawkish monetary policy stance.

The US central bank hiked interest rates by 75 basis points (bps) in its last meeting, taking the benchmark rates to 3.75 per cent-4 per cent, the highest since January 2008.

Another good news, according to V K Vijayakumar, chief investment strategist at Geojit Financial Services, is that since the dollar is weakening, FIIs are likely to increase their buying in Indian equities.

"Now that the inflation print -- both CPI and core -- has come below expectations, the direction of the markets is a foregone conclusion. Since the CPI and core print indicate moderation of inflation, it is probable that the US Fed might pause after one more hike of 50 bps. This is good news for global equity markets," says Vijayakumar.

"It is advantage bulls for the near-term. New record for the Nifty50 is only a question of when," Vijayakumar predicts.

In the last one month alone, the S&P BSE Sensex and the Nifty50 have gained nearly 6.3 per cent and 8 per cent, respectively.

The midcap and smallcap indices, too, on the NSE moved up over 3 per cent and 2 per cent, respectively, during this period, data shows.

Slow and steady

That said, instead of a runaway rally or a sharp up move, analysts say the gains from hereon will be gradual.

"The Nifty will eventually make an all-time high and go beyond. However, the speed (of the up move) will be slow. The Indian markets were outperformers since the past few months and it is time that the other (emerging market) peers play catch up," says Nandish Shah, senior derivative and technical analyst at HDFC Securities.

"The September quarter results season back home is also at the fag-end; hence, there will be a lack of triggers. For the Nifty50, 18,300 is an immediate resistance. Once it is able to cross this, it can hit a new high; 17,900 should be the stop loss for trading longs," Shah adds.

Rupen Rajguru, head of equity, investments and strategy at Julius Baer, too, thinks it will not be a runaway rally from here as the market valuations seem expensive.

Though he remains optimistic on the road ahead for the economy and markets, he expects stock-specific gains based on news flow going ahead amid intermittent market corrections.

"India is placed far better than its peers on the macro-economic level. The Nifty is trading around 21.5x FY23 earnings. From an index level, I do not see a big upside in the immediate term," says Rajguru.

"There can be stock-specific action," Rajguru points out, adding, "That said, if there is a 'Santa Claus rally' going ahead, the Indian markets, too, will participate and the frontline indexes can breach their previous highs."

Feature Presentation: Aslam Hunani/Rediff.com