Moneycontrol
Sep 13, 2017 09:31 AM IST | Source: Moneycontrol.com

Nifty on course to hit 10,500 in couple of months, if it holds above 10K

Higher investment flows both from domestic and foreign investors should provide downside support to the markets.

By Arpit Jain

Like most global equity markets, Indian markets too have had a great run over, hitting new highs or testing previous highs on the expectation of smart global recovery as well as unprecedented inflows into equity mutual funds.

While everyone agrees India is a great story for the medium to long term and the view has not changed in the medium term regarding growth or political stability, but the disappointment in earnings and a possible disappointment in gross domestic product (GDP) makes a lot of people nervous.

Higher investment flows both from domestic and foreign investors should provide downside support to the markets.

Valuations too are at peak levels. Our discussions with investors these days are more towards worries about rich valuations, although in many discussions recently, the valuation debate has been ignored altogether.

We believe that we are in price-earnings multiple expansion rather than earnings growth this year, especially for cement, consumer staples, autos, and non-bank financials.

The recovery is driven by a number of reforms undertaken over the past few years coupled with a favourable macro environment that can drive sustained growth in corporate earnings over the next few years.

In the near term, the markets may remain sideways and will be driven by growth recovery as it materialises over the next few quarters.

However, the growth recovery is at risk as indicated by falling yields, flattening yield curves and inflation having come off sharply indicating weak demand recovery.

Besides this, the emergence of geopolitical risks also poses a threat in the near to medium term.

Any risk aversion arising out of sharp global market correction on the back of either global growth concerns or geopolitical reasons is the biggest risk that we need to keep an eye on.

On the monthly chart, we are observing a bear candle with narrow body formation which indicates a pause of the current up move.

In the coming month if Nifty trades and closes above 10006 levels then it is likely to test 10,138 – 10,270 – 10,424 levels.

However, if Nifty trades and closes below 9,829 level then it can test 9,697 – 9,565 – 9,411 levels.

Broadly, we are of the opinion that for the current month as long as Nifty holds 9680 on the daily closing basis there is a high probability that Nifty may test the 10300 - 10500 in a couple of months.

Disclaimer: The author is AVP at Arihant Capital Markets. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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