Nifty reaches a new mile stone of 17000!
In the month of august, even amid the fears of the 3 rd wave of covid, fears of US fed tapering and mixed global cues, both nifty and sensex surged towards the end of the month to reach a new mile stone of 17K and 57K respectively making august as of the best performing month beside Feb’21 this year. The market behaved as per the last month outlook with the target around 16750 and we said that 17000 may be touched soon. The market gained 8.7% this month and this was mainly due to rebound in consumer spending, and improved manufacturing, government’ dovish stance and china’s tightening regulations making India a more viable investment destination for FIIs. After the massive GDP contraction of 24.4% in the April-June quarter in FY20-21, the recent GDP data shows that it has grown by 20.1% in the April-June quarter in FY21-22, all of these factors have helped markets to blow past our last month’s estimated major resistance level of 16750. The global markets including US was also positive last month but Indian market outperformed all other markets.
Looking at the sectorial performance for the month of Aug, we can see that many of the sectors performed positively. There were few sectors which had stellar performances such as IT, FMCG, Financial services and bank. There were few sectors that were laggards such as Media, Metals, Realty & PSU Bank. The outlook for our market remains positive for this month on many positive factors including strong momentum even though market is at an all-time high after the huge breakout above 17k. Broadly all the sectors will do well but momentum may pick up in banking, metals, Auto, financial services. The last month rally was led by large cap, hence looking at uptrend the midcap and smallcap stocks can catch up and perform well.
Important events & Updates
Few important events of the last month and upcoming are as below:
- The FM unveiled a massive Rs. 6 lakh crores National Monetization Pipeline that will look to unlock value in brownfield projects for infrastructure creation across the country. This can reduce the fiscal deficit gap. The implementation need to be monitored carefully.
- Indian GDP numbers announcement this Tuesday shows that the April-June quarter (Q1) of the on-going financial year 2021-22 (FY22) expanded 20.1% YoY.
- India’s Wholesale Price Index in July 2021 eases to 11.16% YoY as it finally falls below 12% after seeing a record high in May as announced on 16 th Aug.
- India Vaccination program – India’s biggest vaccination drive launched this year is in full swing. As of Sep 1, number of Covid-19 vaccine doses has crossed 64.5 Cr.
Indian Market Outlook
The Indian market outlook remains positive for the rest of the year with upside target 18000 considering the recent big movements. The market appeared stretched at this level and may see some consolidation at this level but may not see any major correction unless any macro changes or 3 rd wave of pandemic have a major impact or global market events like significant tapering of liquidity by FED. The outlook for this month on fundamental & technical outlook is explained.
Fundamental outlook: The rally is expected to continue this month also owing to positive GDP numbers, India becoming an attractive option for investors amidst Chinese regulatory concerns and Indian government’s accommodative stance. Last week just before the break out of 17k levels, markets were trading sideways and the rally remained polarized and it is seen that the largest 10 stocks in Nifty 200 outperformed the other 190 stocks by 7-8%. We will soon be heading towards the festive season and it can also impact economy positively. Hence, the market seems to remain in uptrend for the rest of the year with consolidation in between with some minor pullbacks.
Technical outlook: Nifty has crossed an all-time high of 17k last month and now the upside target is 18k levels by the end of the year due to the positive economic indicators. The outlook for this month still remains positive but it may see some consolidation through this Bull Run, mainly due to some concerns regarding high valuations. Looking at the technicals there is an immediate resistance at 17600 and major resistance around 18000 levels in the month of Sep. There is immediate support at 16700levels and major support at 16200 levels. The RSI for Nifty50 is around 77 which signify that it is near the overbought zone.
The Global market outlook although remains positive, concerns growing cases of delta variant have made investors cautious. The US economy continues to grow at a healthy pace and The US fed chair, in the meeting last Friday as expected reiterated that the rise in inflation is likely transitory and would closely monitor the situation. The Eurozone continued to grow at a strong pace in August and it is expected to continue this month but there may be slight deceleration, largely due to supply chain obstacles. Indicators point to a deceleration of China’s economy – rising infections, new restrictions on mobility, supply chain bottlenecks, natural disasters. The outlook remains positive but it may experience some consolidation and minor pullbacks.
Gold market has been trading sideways and consolidation in August. In the month of August gold remained around the 47000-48000 range. The fall of dollar against rupee might influence gold’s rate reflecting a lower gold price in the domestic markets since dollar to rupee conversion improved. The Gold has been underperforming since mid 2020 due to the strong uptrend in Equity market. There is no major trend and it may remains sideways as of now.
WHAT should Customers Do?
We have stated in the past market outlook that Market is appearing at stretched valuation but the trend is positive. Market have run a lot and given staggering return post fall in Mar’20 due to Pandemic. Here Its worth mentioning about the theory of reflexivity to explain a bit about this movement. Reflexivity in economics is the theory that a feedback loop exists in which investors’ perceptions affect economic fundamentals, which in turn changes investor perception. Reflexivity theory states that investors don’t base their decisions on reality, but rather on their perceptions of reality instead. The process is self-reinforcing and tends toward disequilibrium, causing prices to become increasingly detached from reality. George Soros is famous for formulating the general theory of reflexivity which says that market always react to the extreme on upside and downside and this explains the boom and bust cycles. However, the theory has the limitations and one cannot time the top and bottoms of the market. Investors should always follow a disciplined approach towards Investing and follow the prudent asset allocation process and Indian market is in Bull Run with long term growth story.
Also read : here-is-our-outlook-on-the-markets
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