Why is Nifty 50 witnessing series of retracements after touching record highs?
Stock market today: Continuing its upward trajectory from Thursday, the Indian stock market experienced a significant rally in early morning trading as the Nifty 50 reached a new milestone of 22,794, surpassing its previous high of 22,783 set earlier this week on Tuesday. This achievement underscores the market’s resilience and upward trend. Similarly, the BSE Sensex opened on a positive note, nearing its all-time high of 75,124 with an intraday high of 75,095. The Bank Nifty index also regained momentum, surging over 0.60 percent in morning trading and approaching its current high of 49,974 with an intraday high of 49,607. In the broader markets, the small-cap index rose by 0.30 percent, reaching a new peak of 47,678, while the mid-cap index climbed by around 0.50 percent, hitting a new high of 42,760. However, like on Tuesday this week, profit booking triggered at higher levels, and frontline indices turned red after a few hours of the opening bell.
Why Nifty 50 turned red after climbing to a new peak?
On why Nifty 50 and other stock market indices are turning red after touching new highs these days, Ganesh Dongre, Senior Manager Technical Research at Anand Rathi, said, We may continue to see profit-booking on the stock specific level in upcoming trading session as well, as the nifty 50 index is in an overbought condition. The Anand Rathi expert said that the Bank Nifty is in the 48,500 to 50,000 range, and a fresh uptrend can be expected only when the index gives a fresh breakout above the 50,000 level on a closing basis.
The Nifty 50 index failed to sustain itself at higher levels for one more time as the index is overbought, but ample liquidity is not allowing the correction to go down deep, Sandeep Pandey, Founder of Basav Capital said.
Stock market today: Why Nifty 50 touched a new peak?
According to stock market experts, frontline indices of the Indian stock market, including Nifty, are rising and making a series of new highs due to robust Indian economic developments in the previous month. They said that India has registered the highest auto sales, highest GST collection, highest power consumption, highest monthly home sales, lowest bank NPA, and highest UPI transaction in April 2024. Apart from these, the US Fed downplaying rate hike buzz, the weak US dollar, positive Q4 results of the 2024 season and liquidity in the market are some other reasons that are fueling the Nifty 50 and other Indian indices to record highs regularly.
1] Strong Indian economy: The primary reason for the rise in frontline Indian indices and Nifty today hitting a new peak can be attributed to the robust economic numbers for April 2024. Last month, India registered the highest GST collection, auto sales, UPI transactions, power consumption, monthly home sales, etc., which has injected fresh confidence among the Indian stock market investors, said Sandeep Pandey of Basav Capital.
2] US Fed meeting outcome: The outcome of the recent US Federal Open Market Committee (FOMC) meeting has also had a significant impact on the Indian stock market. Despite concerns over inflation, the US Fed has hinted at a potential interest rate cut, which could initially boost stock prices. Lower interest rates are generally favorable for stocks as they can stimulate economic activity and corporate profits. However, the central bank has maintained a cautious stance, which could influence future market trends, said Sugandha Sachdeva, Founder of SS WealthStreet.
3] Weak US dollar: After the US Fed meeting, profit-booking has triggered in the currency and bond market. The US dollar index has nosedived around 105 levels from 106.50 levels. So, investors are expected to book profit in the currency and treasury market and switch position to equities and other assets, said Saurabh Jain, Vice President — Research at SMC Global Securities.
4] Ample liquidity: There is ample liquidity in the Indian markets, reflects DIIs’ recent trade pattern. Recently, we have witnessed a good number of Indian banks declaring fundraising plans, which signals that the Indian banking sector is expecting business volume to remain sustained, especially the lending business. We are witnessing this because the high-interest rate regime has peaked out, and the RBI may declare a timeline rate cut this year following the US Federal Reserve, said Sandeep Pandey of Basav Capital.
5] Positive Q4 results 2024 season: Barring IT company’s results, most of the frontline companies have delivered positive Q4 results 2024. Reliance Industries, ICICI Bank, Adani group companies, etc., have delivered better-than-expected Q4 results, which sparked stock-specific traders to participate in the current market rally, said Saurabh Jain of SMC Global.
Stocks to buy today
On shares to buy in the current Indian stock market, Sandeep Pandey of Basav Capital said, One can look at power and steel stocks as these two segments may outperform other sectors. One can buy shares of Tata Power, Adani Power, JSW Steel, and Tata Steel despite Nifty 50 hitting a new high.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of ThirtyTimes. We advise investors to check with certified experts before making any investment decisions.
