Indian Stock Market- Rough road ahead…. 

Our Indian stock market recently has reached a major point, the broad based Nifty Index has crossed 20000 points for the first time and hit an all-time high of 20222.45 points on 15.09.2023, the Nifty Index, which has been struggling to cross its highest level, more than a month after setting a historic record, and has struggled to go above it several times but it unable to succeed to cross this all-time high level, will the Nifty Index travel northwards above 20222.45 points in the near future? That is the million dollar question!

Since 2008, I have been a full-time research analysis on the Indian stock market and for the first time of history of the Indian stock market, for the last 7 consecutive years, the Nifty Index and Sensex have closed positively at the end of each year, will both indices will end, on a positive note this year too? Or will move down from the last year closing level?.. We have to wait and see…my view on this, being an eighth year, both the indices likely to end with positive note i.e., last year on 31st December 2022, Nifty index closed at 18105.30 points and Sensex closed at 60840.74 points, I think there is a chance for positive end without any change, unless any major things not happens domestically or globally, but what could happen in next year is the biggest question?, which is always lingering in my mind.

When we look at the current domestic happenings/events and global happenings/events, our Indian stock market has to undergo an acid test from December onwards, also it has to face a tough challenge to break the all-time high point and travel northwards.

We have to keep in mind of the following, the geopolitical situation, high interest rates, inflation, lack of employment opportunities, upcoming five state assembly elections, Indian parliamentary elections due next year and quarterly performance of Indian companies.

Now let's look at the above one by one in detail:

First, Russia's ongoing war against Ukraine and the recent Hamas war against Israel, the fear that these two wars will lead to a third world war? It has raised this question in everyone's mind. If these wars turn into a third world war, the consequences will be dire, mainly leading to a rise in crude oil prices, rise in treasury yields i.e.,, bond rates, even yesterday 23^rd Oct’23- Monday sudden last hour sell-off due to US treasury yield touched 5%, if the bond yield rise northwards then the global stock market will face a huge sell-off.

Secondly, the rising interest rate will last for a long time and there will be no possibility of going down, this is what the US Federal Bank mentions and as a result our Reserve Bank is also unable to reduce the repo rate and maintaning the status quo at 6.50%. There is no doubt that this situation will continue next year as well, and US Fed rate may go up by another 50 BPS, the RBI also may follow suits to rise 25-50 BPS, next year,  as a result of which global investment firms are withdrawing investments from the Indian stock market. Since  January’23, Foreign Institutional Investors (FIIs) as of 23.10.2023, have withdrawn investments worth Rs.27,199.64 Cr., on a net basis. Domestic Institutional Investors (DIIs) absorbing the FIIs selling by pumping the funds, (as of 23.10.23, the DIIs bought on a net basis  Rs.134,983.58 Cr.) hence, our Indian stock market is trading in a sideways pattern without major sell-off.

Thirdly, the retail inflation rate has remained constant between 5 to 7 percent and it is likely to continue at this level in the coming days. Unemployment is also likely to rise in the near term.

Fourth, the upcoming five state assembly elections viz., Madhya Pradesh, Rajasthan, Telangana, Mizoram and Chhattisgarh, will be held in November and the results will be announced on December 3rd, 2023. These results could change the course of the Indian stock market and reverberate till next year's parliamentary elections, which will likely to be held between April to May 2024. Now, the important question has arisen i.e., will the present ruling government win again and form a stable government with an absolute majority or at least with a simple majority? Or will there be a hung parliament?  If no party gets a majority, the Indian stock market will face a huge drop towards south, after the election.

Last but not least, there will be no major positive change in the performance of Indian companies in the coming quarters especially, the IT industry stocks are largely trading at flat and the IT industry is also experiencing layoffs, no increments and salary cuts. The economic uncertainty will affect not only the IT sector, it will also affect, Auto, Banking, Manufacturing, FMCG and other industries too.

Looking at the above facts, for now the chances of Nifty index is crossing above the all-time high point i.e., 20222, is remote. Even, if it goes above from the current trading level, it may stop at 19850-20000 level and again it may trade between the points of 20000-19250 in a sideways movement. The Head and Shoulder Pattern made in the Nifty Index weekly chart, tells us that, if it moves and closes below the neck point i.e., 19250-19230 then, it may touch the next support levels i.e., 18885, further moves below, it can also re-visit the next level support, which lies at 18365-18125-18050. On the other hand if, the Nifty index moves and closes above 20000-20222 then, then it may try to climb till 20500-20700 levels, but the chances are very bleak. 

Finally, I conclude that the trader/investor must adopt the cautious approach and invest in diversified sectors in a phased manner also try to invest in the segment such as Bond and Gold etc., and book the profit in equity then and there, partially and re-invest again when there is sharp down side move in the Nifty Index.  

Wishing you for a safe, secured and profitable trading.

DISCLAIMER:

The writing in the above special bulletin should only be construed as a view/guidance. I assert that any business or investment decisions should not be based purely on the information presented in the special bulletin. As a Research Analyst, I will not be responsible for any losses incurred by a visitor/investor/client, as a result of decisions made based on any information given in the special bulletin.

Research Analyst Disclaimer: Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.