Indian stock market benchmark Nifty 50 is just a few points away from its all-time high level. On Tuesday, August 27, the Nifty 50 hit its intraday high of 25,073.10, just 5 points below its all-time high of 25,078.30.
With a fresh record high on the horizon, investors are debating whether to seize this as a buying opportunity or to lock in profits. This uncertainty stems from the domestic market's lack of new catalysts, as it appears to have largely priced in key factors like a potential US Fed rate cut in September. Meanwhile, challenges such as geopolitical tensions, stretched valuations, and lacklustre quarterly earnings continue to weigh on sentiment.
According to Bloomberg data, the Nifty 50's current price-to-earnings (PE) ratio is 24.5, above its one-year forward PE of 20.8. The current price-to-book (PB) value, at 4.03, is also above its one-year forward PB of 3.23.
However, experts say that even though Nifty's valuation is high, it is not at alarming levels, and a high valuation does not mean there are no opportunities in the market.
Mint consulted several fundamental and technical experts to gather their insights on the market's short-term outlook and provide guidance on what investors should do at this juncture. Here's what they said:
The market seems to have partly discounted the US Fed rate cut in September but has not discounted an RBI rate cut at the next policy meeting in October.
This could be a significant trigger for the Indian stock market. RBI rate cut can boost banking stocks because even though the banking space is struggling on the deposits front, the valuation of banking stocks is below their historical average.
Rate cuts will lead to a substantial spurt in the banks' bond holdings. That will be a positive.
Also, bond yields coming down in the US will result in a pick-up inflows to emerging markets. It is very much possible that Nifty 50 goes beyond 26,000 this year.
With the Nifty trying to sustain above the 25k mark, we believe the benchmark must close above the previous highs for further upside convincingly.
An expected interest rate cut in the US in September places Indian equities favourably for an increased foreign inflow going ahead.
With heavyweights in the Nifty 50 index continuing to show resilience, we expect further momentum and will not be surprised to see the index approaching the 26k mark in the September series.
Also, receding fears of an escalation in global geopolitical conflicts coupled with increased domestic participation would continue to support equities in the short term.
Nifty has crossed the 25,000 level for the third time and has comfortably held above it, indicating strong support for the market from various sectors.
Besides supportive domestic factors, global macros also contribute to the current market rally, adding to its strength.
From a technical standpoint, the market is expected to move towards 25,300-25,500 levels in the near future.
The support levels have shifted from 24,500 to 24,800. Both the Bank Nifty and IT indices, which play significant roles, reinforce the overall market strength and may help push the indices towards 25,300-25,500.
The recommended strategy is to buy on dips around 24,950-24,900 levels. However, it is advisable to reduce weak long positions above 25,300 levels and focus on specific stocks.
We are witnessing strong Call and Put writing at the same strike of 25,000 in the current series. We may see short covering in the next two trading sessions.
The overall trend is positive, but we need a powerful movement on the expiry date. This can happen tomorrow also because of the expiry of Bank Nifty.
There can be a breakout in the market, after which the Nifty 50 may move higher by 250-300-odd points. The primary focus is on the Bank Nifty because it is on a reversal trajectory.
There may be a strong movement in Bank Nifty, which can provide a solid thrust to the Nifty 50. In the next one to two trading weeks, the Nifty 50 may hit 25,300.
In the recent correction, the Nifty 50 index has stayed above the important 24,000 level, barring August 6.
If the index closes at a new high today, then the upper target is 25,500. A close below 25,000 may take the Nifty 50 index to 24,600 or 24,300. These levels are most likely to act as support.
Fresh buying can be done at support levels. Avoid going aggressively short on the Nifty 50 index at this level.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
