Nifty, Sensex bask at record highs: What's next? Here's what market experts say

Sensex and Nifty50 were up 3.4 percent each last week

After Indian equity benchmarks - the S&P BSE Sensex and Nifty50 rallied 3.4 percent each last week, extending gains for six straight weeks, market participants will eye a slew of factors like retail inflation figures, manufacturing data, new listings and global central banks interest rate decisions this week.

On December 8, Nifty50 zoomed past the 21,000-mark to hit a lifetime high of 21,006 levels, while the Sensex hit an all-time high of 69,894 levels after the Reserve Bank of India (RBI) kept repo rates unchanged at 6.5 percent for the fifth consecutive time, in-line with market expectations. The RBI also kept inflation forecast steady at 5.4 percent for FY24, but upgraded GDP forecast to 7 percent for FY24.

Last week also marked investors' heightened exuberance in domestic stock markets as market capitalisation breached past $4 trillion-mark on December 5 post Bharatiya Janata Party's (BJP's) sweeping victory in three out of four state elections. The ruling party's victory in key state elections instilled investors' confidence of stable government formation ahead of 2024 general elections.

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Bullish undertone intact this week; US Fed policy outcome widely eyed

Stepping into this week, analysts believe that the overall undertone of markets will continue to remain bullish despite some consolidation hiccups likely as investors try to book profit.

"Both Nifty and Bank Nifty are currently experiencing strong bullish momentum and trading in uncharted territory. Nifty faces immediate resistance at 21,025, with further target levels of 21,175 and 21,325. However, a strong support level exists at 20,850, with 20,600 serving as a critical support at any pullback. The overall trend remains bullish, although some intraday consolidation or pullbacks are likely," said Santosh Meena, Head of Research, Swastika Investmart.

On the other hand, Vinod Nair, Head of Research at Geojit Financial Services said that the outcome of awaited US Federal Reserve policy meeting will be pivotal in shaping market sentiments.

"In the upcoming data-centric week, focus will be on crucial releases, including inflation data from India and the US. Indian inflation is expected to rise, while US inflation will remain steady. Indian industrial and manufacturing production is also expected, while consensus expects expansion," Nair added.

On December 12, India and US will release consumer price index (CPI)-based retail inflation figures. According to a Reuters poll, India's retail inflation may pick up in November to 5.7 percent, faster than 4.87 percent recorded in October.

Later in the week, on December 13, the US Federal Reserve will announce its interest rate decision. The global central bank is expected to hold interest rates until at least July, showed a Reuters poll.

Additionally, Bank of England and European Central Bank will declare their interest rate decisions on December 14. Both the central banks are expected to keep interest rates unchanged, said a Reuters poll. Economists further anticipate the BoE and ECB to start reducing interest rates from the second quarter of 2024 onwards.

ALSO READ: Primary Market: 7 IPOs hitting Dalal Street with 2 listings next week

Bank Nifty index hits record high: Where is it headed now?

On December 8, the Bank Nifty index also hit a fresh all-time high of 47,303.65 levels. The Bank Nifty index was up over five percent last week and is on its way to clock its biggest weekly gain since July 2022.

Analysts believe the steam in banking shares came on the back of the RBI's measures to address liquidity deficit, including reversal of standing deposit facility (SDF).

"For Bank Nifty, the short-term texture is bullish. For the bulls now, 46,500-46,200 would act as a key supports zone. If it sustained above the same, then it could rally till 47,800-48,000," said Amol Athawale, Vice President - Technical Research, Kotak Securities.

Meanwhile, Rupak De, Senior Technical analyst at LKP Securities believes that the Bank Nifty breakout from current consolidation from 47,000 can push the index towards 48,000 in the short-term. "The support is placed at 46,500, where put writers have built significant positions. A decisive move above 47,200 might trigger a significant rally," he added.

What should be your investment formula?

After the RBI's in-line policy outcome, Palka Arora Chopra, Director, Master Capital Services believes that interest rate-sensitive sectors such as autos and real estate will benefit as consumers will now spend more taking into account borrowing cost forecasts.

Ajit Mishra, SVP - Technical Research, Religare Broking, however, suggests traders to stay focused on stock selection and prefers banking and IT for long trades. "The rotational buying across heavyweights is fueling the up move and we see the same trend to continue," he added.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.