MUMBAI: Supported by the growing optimism about reducing borrowing costs after the U.S. Federal Reserve cut key benchmark rate by 50 bps in the week ending September 20th, Local benchmark indices, Nifty 50 and Sensex continued their upward momentum for the third consecutive week, reaching fresh all-time highs. The Nifty 50 and Sensex climbed to all-time highs of 26277.35 and 85978.25 respectively, before closing the week at 26178.95 and 85571.85, a weekly gain of about 1% each.
Market experts believe the optimism to continue where Nifty 50 will face resistance at 26,500 on the upside and 25,900 on the downside. Fundamentally, the market will guided by global cues and macroeconomic data.
“Nifty 50 has delivered a strong weekly closing for the third consecutive week, now trading above 26,000. Market sentiment remains positive, with immediate resistance at 26,500, and a breakout above this level could propel the index towards 26,650. On the downside, key support is at 25,900, with a breach potentially triggering selling pressure towards 25,600. Given the prevailing positive sentiment, we recommend a "buy on dip" strategy for traders looking to capitalize on any short-term corrections,” said Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services.
Santosh Meena, Head of Research, Swastika Investmart, said A key highlight from last week was China's economic activity, where the People's Bank of China (PBOC) announced interest rate cuts and a reduction in the reserve requirement ratio, along with fiscal stimulus measures. This sparked a significant rally in both the Chinese and Hong Kong markets, which in turn led to a surge in commodity prices. The Nifty Metal Index, for instance, surged 7% last week, driven by the bullish sentiment in metals.
“Looking ahead, it will be interesting to monitor Foreign Institutional Investors (FIIs) and their flow into India. September saw the highest FII inflows into Indian equities this year. However, with the Chinese market trading at nearly half the valuation of Indian equities, there may be a tactical shift of flows towards China after the recent stimulus. It's important to note that 95% of foreign inflows to India come through the Emerging Markets ETF route, which means any uptick in flows to China could also lead to continued foreign investments in India,” added Meena.
Domestically, liquidity remains robust, with signs of sectoral rotation from overvalued segments to areas with more attractive valuations. Meena said, “From a technical perspective, the Nifty continues to exhibit strong bullish momentum. Key resistance levels to watch are at 26,277, 26,575, and 26,800. On the downside, the 26,000–25,800 zone serves as a strong demand area. As long as Nifty remains above the 25,800 mark, the bullish trend is likely to stay intact.”
Going ahead, global factors will play a pivotal role, especially with the absence of any major domestic events, said Ajit Mishra – SVP, Research, Religare Broking Ltd.
"Auto sales data, set to be released from October 1, will be a key focus, along with important economic indicators such as HSBC India Manufacturing PMI and HSBC India Services PMI. Additionally, trends in foreign fund flows and crude oil price movements will be closely watched, as they could influence market sentiment," Mishra said.
Vinod Nair, Head of Research, Geojit Financial Services said that a risk to the rally is elevated valuations. Given the stimulus and attractive valuations like China, FII are inclined to eastern Asian peers. Looking ahead, investors will be focusing on the Q2 earnings, with an anticipation of an improvement in earnings outlook, he added.