The equity benchmarks gained for a second straight session on November 29, with the Nifty surpassing the 20,000 level for the first time after September 18 on positive global cues and gains in heavyweights such as HDFC Bank, Infosys and Reliance Industries (RIL).
"The Nifty's recent crossing of the psychological level of 20,000 and the BSE market cap's ascent to the $4 trillion mark signals the start of a fresh momentum. Domestic liquidity has provided support, but the lack of foreign inflows due to high US bond yields has been a hindrance," said.
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Rally in index heavyweights
RIL gained after global brokerage firm JPMorgan shared an "overweight" rating on the counter with a target price of Rs 2,810 apiece, implying an upside of 17 percent from current levels.
The US-based Federal Retirement Thrift Investment Board (FRTIB) recently announced the probable transition to a new MSCI Index.
The move may lead to $809 million inflows for RIL, ICICI Bank, Infosys, HDFC Bank and Tata Consultancy Services (TCS), according to Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research. This contributed to index heavyweights' gains of up to 1 percent.
Global cues
The market optimism was buoyed by dovish remarks from US Federal Reserve official Christopher Waller, suggesting a potential interest rate cut as early as March 2024 if inflation continues to decline.
Asian stocks touched one-week highs on the upbeat market sentiment. A drop in the US 10-year bond yield to 4.3 percent and the dollar index slipping below 103 are also being seen as positive indicators for local markets.
"Since the global market backdrop continues to be favourable, the rally in India is likely to continue," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The next resistance for Nifty
The market appears primed for a pre-election rally, and one can anticipate the Nifty soon surpassing 21,000, said analysts
"According to the charts, the Nifty may be taking support at 19,850, followed by 19,800 and 19,750," said Deven Mehata, Research Analyst at Choice Broking.
On the higher side, after 20,000, the immediate resistance for the index is seen at 20,100 and 20,150.
Rupee firm
The strengthening of the rupee against the US dollar also boosted sentiment.
The local currency rose 3 paise to 83.31 against the dollar in early trade. The dollar index, which tracks the movement of the greenback against a basket of six major world currencies, declined 0.09 percent to 102.65 level.
What should investors do?
Interest rates in the US have peaked, and the dollar index is declining, which is expected to attract foreign institutional investor (FII) inflows into the Indian equity market, said Santosh Meena of Swastika Investmart.
Despite strong fundamentals, volatility is expected leading up to the state election results. However, any weakness caused by this could present a compelling buying opportunity, he added.
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