After Sensex surged 60,000 on Friday due to strong liquidity inflows and investor optimism, investors will keep an eye on key 18,000 levels for Nifty. The NSE index hit a record high of 17,947 on Friday but failed to top the 18,000 mark as profit-booking forced it to close at 17,853 levels. The index had gained 1.52% last week.
The indices are likely to remain volatile in the latter half of the week due to rich valuations and monthly expiry of F&O contracts. Analysts say immediate support for Nifty has been placed at the level of 17642-17792.
“Nifty 50 Index closed in the green again in the week after making a new high of 17,947. Nifty is trading at new highs, BankNifty ended on a flat conclusion and continues to struggle around its previous all-time high. To sustain the bullish momentum, Banknifty will need to hold. The midcap basket is showing signs of underperforming as compared to the benchmark,” he added.
“Failure to cross the previous high would indicate weakness for the broader markets. Immediate support for Nifty is now placed at 17,600.”
Given the rich valuations, analysts advise traders not to take an aggressive approach at current levels, but to focus on downside or immediate support. They also say, in the current volatile markets, investors should invest only in fundamentally strong stocks as markets are volatile and unpredictable.
According to research by Samco, “Traders are advised not to create aggressive longs at current levels, but to maintain a bullish bias and initiate longs around dips or immediate support.”
Motilal Oswal, MD & CEO, Motilal Oswal Financial Services Ltd. said, “Given the rich valuations, one cannot ignore the intermittent volatility – although we are on the back of improving economic activity and improving corporate earnings. Hope the positive momentum continues.”
Meanwhile, analysts at HDFC saw a broad correction in the markets after Nifty moved closer to 18,000.
Nifty is now close to 18,000 and once this round number is achieved, we can see a broad correction in the markets. Band 17642-17792 is support for Nifty. However, the forward decline ratio for September 24 fell deeper into the negative, indicating panic among market participants about the broader market, said analysts at HDFC Securities.
With the earnings season approaching, the focus will also be on IT stocks. If Accenture’s strong fourth quarter results and bumper forecasts are anything to go by, analysts expect these stocks to rally in the medium term.
Apart from IT stocks, auto companies will be in focus as they come out with monthly sales data.
Analysts say that given the growing concerns about chip shortages and consequently eroding sales prospects, the automobile sector’s monthly sales numbers are sure to attract attention to determine future trends in auto stocks.
Meanwhile, foreign portfolio investors were net buyers with investments so far in September ₹21,875 crore and are positive on the long term outlook.
they have pumped ₹13,536 crore in equity and ₹8,339 crore in the loan segment.
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