Market outlook 2024: Will Nifty sustain its uptrend or witness the much-awaited correction?

Indian markets shed almost a per cent in the 11 days of September due to geopolitical tensions, concerns regarding rate cuts, expensive valuations and other negative global cues.

The benchmark Nifty has lost 0.93 per cent in September so far but has risen almost 15 per cent in 2024 YTD. The decline in September comes after three straight months of gains. The Nifty advanced 1.14 per cent in August, 3.9 per cent in July, and 6.57 per cent in June.

Will the Indian markets continue their upward trajectory, or will some correction be seen? Various experts share their insights on what 2024 holds for investors. With strong fundamentals and favourable macroeconomic conditions, many believe the rally may be sustained in the near term while cautioning about the potential impact of global events and valuations.

Sentiment Remains Positive

Vishal Bajaj, Director of Wealth at Client Associates, believes strong liquidity, robust fundamentals, and a favourable macroeconomic environment will likely keep markets buoyant. He emphasizes that "sentiment-led momentum plays a huge role in the short run," which currently appears positive. Bajaj cautions that markets may continue to climb unless an unforeseen external event occurs, driven by positive investor sentiment.

Bajaj adds that while market fundamentals are largely supportive, valuations should be closely monitored. Large-cap stocks are currently in a “slight over-valuation zone”, while mid- and small-caps exhibit “moderate to high valuation”. Given its relative stability compared to smaller stocks, he suggests that the large-cap segment offers a better risk-reward ratio for medium to long-term investors.

Nishit Master, Portfolio Manager at Axis Securities PMS, echoes a similar sentiment. He remains optimistic about the market and expects “mid-single-digit returns from Nifty in 2024” with no significant corrections in the near term.

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, highlighted two crucial events that could impact global financial markets in 2024: the Federal Reserve's pivot on interest rates and the U.S. Presidential elections. According to Sheth, “A rate cut from the Fed is generally seen as a positive move as it injects liquidity into the market.” However, rate cuts often signal economic turmoil, adding an element of caution. Additionally, the U.S. elections, like India’s, can introduce volatility. Sheth expects heightened volatility in the final quarter of 2024 due to these developments.

Deepak Jasani, Head of Retail Research at HDFC Securities, however, believes the Nifty could experience some intermittent corrections despite its recent highs. “In the latter half of September, we may see a correction in Nifty,” Jasani predicts, noting that the overall market trend remains positive.

Nifty Technical Overview: Key Levels and Market Outlook

Prabhudas Lilladher, a brokerage house, observes that the Nifty index has experienced significant profit booking from the 25,100 level, resulting in a weak candle pattern that suggests a potential formation of a lower top. This indicates a cautious approach may be necessary in the upcoming sessions. The crucial support level to watch is 24,800; sustaining this level is essential to maintain the overall bullish bias. Conversely, to confirm a continuation of the positive trend, the index must decisively breach the 25,150 zone on the upside.

Sameet Chavan, Head of Research, Technical and Derivative at Angel One, notes a pattern where upward movements have been sluggish while declines have been more pronounced. This trend has led to a cautious stance against aggressive bets during intermediate bounces. Chavan advises avoiding aggressive long positions unless a clear bullish reversal is observed. The current price has fallen below the 20 EMA, indicating potential weakness and suggesting a possible retest of Monday's low around the 24,750 level. Further declines could push prices toward the 24,500 mark if this support is breached.

On the upside, the 25,100 - 25,150 zone remains a strong resistance level. For the weekly expiry, key monitoring levels are 25,000 - 25,100 on the upside and 24,800 - 24,750 on the downside. Additionally, major global data points are likely to influence market movements, making it crucial for traders to stay alert to these developments to gauge the next trend.

While experts remain largely constructive on the market’s outlook for 2024, they also point to critical factors, such as valuations and global events, that could impact the current rally. Investors are advised to keep a close eye on market fundamentals, political stability, and the upcoming Federal Reserve decisions, which could introduce volatility in the medium to long term. Market participants expect continued momentum despite potential short-term corrections, with large-cap stocks offering a more favourable risk-reward ratio for long-term investors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.