The US Federal Reserve paused hiking interest rates and are cautiously optimistic about the economy. The US Fed Rates are at 5-5.25%. Inflation is also around 3.2%, which is comforting and probably the reason why the Fed has paused hikes. Interest rates are back to 2007 levels.
Liquidity conditions are tight and all leading indicators like Copper Prices, Crude Prices are beginning to show signs of revival and might trend upwards suggesting a further revival in the economy. There are some layoffs happening in the services sector which is a cause of concern.
Dollar Index (DXY) is trading at 103.4 level after hitting 107 on the upside. That establishes a range between 100-107 with the current price being right in the middle. Any fall below 100 might trigger a sustainable rally in emerging markets.
On the other hand, any rise above 107 level might see all round selling in risk assets. Gold corrected to USD 2004 after hitting an all-time high of USD 2148 level.
As all timeframes are indicating bullish momentum in Gold this correction should be treated as an opportunity to accumulate at lower levels as it might soon touch 2500 levels.
Silver has also corrected heavily in the last week after hitting USD 25.9 and should be accumulated at this level as Silver might outperform Gold in the recent future.So, things are very moderately positive so far as international markets are concerned.
Coming back to Indian Markets, Nifty 50 closed at 20969.4 after hitting all time high of 21006.1 and India VIX at around 12.47 is suggesting a benign environment.
The Nifty50 Daily, Weekly, Monthly charts suggest a positive trend.
Momentum on daily, weekly and monthly charts are in bullish range and therefore Nifty may further move up in the times to come.
We achieved first target of 21000 this week and next target (22500) could be achieved by Election in May 2024, 12 months trailing EPS is Rs 936 and projected EPS of around Rs 1139 in FY 2024-25 is pointing towards 21800 levels presuming PE levels of 22, suggesting a pre-election rally.
The rise may be straight up or after a decent retracement from the current level depending on various events that may play out in the coming quarters. On retracement the Nifty should not break 18800 levels on the downside or else all the hypotheses will be revisited.
Bank Nifty also showed positive momentum last week and closed at ATH of 47262. The RBI also have suggested bullish stance in the last monetary policy while the rates remained unchanged. Bank Nifty might take a lead in the leg of market rise and likely to hit 52000 levels.
With state results of MP, Rajasthan & Chhattisgarh giving clear mandate to BJP indicates that people have voted for good governance, decisive leadership & stability in both state & General Election 2024.
With these results, in 2024 general elections are likely to be elected the BJP government with a resounding margin and we will not be surprised if the cross 350 tally.
Markets always like stability at the center, good governance and continuation of existing policies. NIFTY 50 PE can get re-rated, opening up further substantial upside.
On further analyzing the sectors of NSE, we found the following sectors to be strong. Also, the stocks showing relative strength to their respective benchmarks are mentioned below.
1. Nifty Bank: Axis Bank, HDFC Bank, PNB, ICICI Bank
2. Nifty CPSE: NLC India, SJVN, Cochin Shipyard, Coal India
3. Nifty Infra: Tata Power, LT, Hind Petro
4. Nifty Realty: Phoenix, Shobha, Prestige, DLF, Swan Energy
5. Nifty Auto: TVS Motors, Bajaj Auto, Hero Moto Corp
6. Nifty PSE: PFC, REC ltd, HAL, BPCL
7. Nifty Commodity: IOC, Coal India, Tata Power, Adani Power, Adani Green
8. Nifty Consumption: Titan, Trent, Colpal
Pick of the Week: BPCL, Coal India
(The author is Founder and Managing Partner, Compounding Wealth Advisors LLP, Smallcase Manager)