Bulls drive Nifty to 21,700, Sensex to new high; rally to continue on US Fed pivot, banking gains

Bulls ruled the Street on December 28 morning, charging the benchmark BSE Sensex and Nifty 50 to record highs of 72,281.63 and 21,728.3, as strong global cues, easing bond yields, and weaker dollar added enough fodder for the rally. The Nifty Bank index, too, clinched an all-time high of 48,589 in opening trades.

Market experts see the non-stop record run in domestic markets is being lent by the mother market USA, aided by a steady decline in the US bond yields (below 4 percent-mark), and falling dollar index beyond 101 levels.

Overnight, all major averages in the US markets closed on a positive note. With just two trading sessions left in the trading year, the Dow Jones and the S&P 500 indices are poised to finish the year with more than 13 percent and 24 percent gains, respectively. Meanwhile, the tech-heavy NASDAQ Composite index has climbed more than 44 percent.

The party isn’t over yet, believes Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies. He told Moneycontrol that the bull run is likely to continue in the near-term as the Fed’s dovish pivot plays out in the market and India is likely to benefit the most in the emerging market (EM) pack.

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“With new highs being clocked day after day, we see largecaps play a big catch-up along with banking stocks,” he said.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services also expects the rally to continue supported by leading banks which are witnessing institutional accumulation.

Banking sector, particularly, Holland of Avendus Capital said will benefit going forward in the run up to 2024 general elections. “Once Fed cuts interest rates, the RBI will also follow suit. This will bring relief in deposit rates and improve net interest margins of margins. To add to it, the capex cycle playout and policy stability post elections will also add to the rally going ahead,” he said.

On technical charts, Chandan Taparia, Senior Vice-President – Derivatives at Motilal Oswal Financial Services said that all levers were in place for Bank Nifty’s outperformance to continue. “The bullish momentum for Bank Nifty index is intact. We expect the current rally to extend and Bank Nifty can rise in the range of 48,880-49,000 in the next few sessions,” he added.

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However, market watchers caution over rising bouts of volatility. India VIX, a gauge for market volatility hovered at 9-month high of 16 levels on December 28.

“Investors should take this as an indication of high volatility ahead. Remaining invested is important in a bull market. But chasing the market at high valuations would be highly risky,” suggested Vijayakumar of Geojit Financial Services.

That said, broader indices continued to fare well in morning trades, with Nifty Midcap 100 and Nifty Smallcap 100 indices rising up to 0.4 percent.

Sectorally, some profit-booking was visible on Nifty IT, Media, and Realty indices, while PSU Banks continued to be the top performing, rising up to 0.7 percent, as of 10:30 am.

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.