Nifty at 21,000 by Diwali? It's possible, say technical analysts

The Nifty 50 index hit the 20,000-mark milestone in intra-day deals on Monday, and is on track to hit 21,000 levels in the next two months (by Diwali) – an upside of 5 per cent from the current levels, suggest technical analysts. However, there can be intermittent corrections on the way, which analysts suggest can be used to buy stocks.

“The last few days are testimony to the undertone of this bull-market. The good thing is there is new leadership from stocks of information technology (IT), capital goods and public sector enterprises (PSEs). BFSI stocks that remained under most pressure are back into positive terrain. We are on track to hit 20,432 (on the Nifty) this month and 21,000 by Diwali,” said Rahul Sharma, director, head – technical & derivative Research at JM Financial Services.

Thus far in calendar year 2023 (CY23), the S&P BSE Sensex and the Nifty 50 have seen a good run with both the indices surging nearly 10 per cent during this period. The S&P BSE Midcap and the S&P BSE Smallcap indices have outperformed and vaulted around 30 per cent and 34 per cent respectively in the nine months of 2023, data shows.

WATCH VIDEO: Nifty hits 20k: What will be the next pit stop?

The recent market rally as per the daily technical charts, said Jatin Gedia, a technical research analyst at Sharekhan by BNP Paribas, indicates that the bulls still have an upper hand, and expects the positive momentum to continue.

“Momentum indicators on the daily and hourly time frame are in sync with the price action. On the upside, we expect the Nifty to target levels of 21,000 from a short-term perspective. In terms of levels, 19,865 – 19,810 is the crucial support zone for the Nifty50, while 20,200 – 20,250 shall act as an immediate hurdle,” Gedia said.

Strong flows

Meanwhile, the market rally over these nine months of 2023 has been driven by foreign flows. Foreign portfolio investors have pumped in a net Rs 131,703 crore into Indian equities thus far in CY23 (net withdrawal of Rs 170,555 crore during the same period in 2022), as compared to Rs 80,108 crore by mutual funds (MFs), and Rs 115,755 crore by domestic institutions (DIIs) during this period. 

In September, however, FPIs withdrew a net Rs 5,558 crore. This, according to Kedar Kadam, director - listed investments at Waterfield Advisors, was triggered by rising US Treasury yields and strengthening US dollar. Though the broad trend of the markets remains bullish, Kadam expects some profit booking to emerge soon, which he suggests investors should use to buy for the long-term. 

“Some risks to this market rally include inflation, erratic weather conditions, rising crude prices, slowing global growth and the resultant impact on domestic exports, escalation in geopolitical tensions. Having said this, we remain optimistic about long-term earnings growth prospects of corporate India and the economy. Any correction in the market on account of profit booking will be an opportunity to add more," Kadam said.

FPIs' Long-Short ratio – an indicator of investor’s positioning in the markets – which was at 39.29 per cent on August 16, moved up to 58.32 per cent on September 8, suggesting an overall bullish bias. During the same period, the Nifty 50 surged 2.73 per cent – from 19,465 – to hit the 20,000-mark in intra-day trade on Monday in a total of 18 trading sessions.

“Short covering at 19,900 strike and aggressive put writing at 20,000 strike helped Nifty surpass the previous all-time high of 19,992 made on July 20. However, the maximum call open interest for Nifty is placed at 20,000 strike. Exiting of call writers from the 20,000 strike is likely to push the index even higher,” said Ashwin Ramani, derivatives & technical analyst at SAMCO Securities.