Nifty hits 21,800, Sensex at record high; volatility may rise going ahead amid ‘overbought’ conditions

Bulls kept domestic markets on a solid ground with both NSE Nifty and BSE Sensex hitting new all-time highs towards the end of trading session on December 28. This comes on the back of improving global sentiments, wherein traders have rapidly raised bets on interest rate cuts as early as March 2024.

The BSE Sensex clocked record high of 72,484 levels to eventually end 0.5 percent higher at 72,410 levels, while NSE Nifty 50 index breezed past 21,800-mark to end 0.5 percent up at 21,778 levels on December 28. Broader indices, meanwhile, outperformed benchmark indices and gained up to 0.7 percent.

Market watchers continue to flag the broader end of markets with extreme valuations and heightened retail exubrence, calling an incoming correction as ‘inevitable’ but investors carry on flushing more money in these pockets.

India VIX shoots up amid overbought markets

As a result, an ‘overbought’ market has shot up India VIX (a measure of investors’ perception about risk of sharp swings based on option prices) to 9-month high at 16 levels on December 28.

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Going ahead, investors can expect strong movements on either side due to higher volatility but the undertone of overall markets remains bullish, said Osho Krishnan, Senior Analyst – Technical and Derivative Research at Angel One. “Since bulls are favoring markets more, we can expect Nifty to see an immediate resistance of 21,800-21,900 in the next two days. 22,000 is possible in another few days as markets are already operating in an overbought territory,” he added.

The leading sectoral gainers of December 28 session were Nifty PSU Bank, Metal, and Oil & Gas indices, climbing up 1 percent each. Bank Nifty also scaled to all-time high in early trade on December 28. The index breezed past the 48,600-barrier, helped by gains in HDFC Bank, Kotak Mahindra Bank, and Punjab National Bank. IT, Media, and Consumer Durable indices dragged.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, suggested that banking names will continue to remain the market flavour in the coming days as they are fairly valued in an overbought market. “HDFC Bank and ICICI Bank will be top picks among foreign institutional investors (FIIs) due to their wealth creation ability and inexpensive valuations in an expensive market,” he said.

ALSO READ: Banks’ asset quality report reaffirms investor confidence, experts see valuation comfort 

Among the key risks to watch in the coming days, China’s resurgence from the big bang stimulus could act as a threat to flows in India, said Andrew Holland, CEO at Avendus Capital, to Moneycontrol. Apart from that, if there is any disruption in the Red Sea shipping lines, it could elevate oil prices, thereby, disturbing the inflation math once again. “But we are not baking any negative triggers at the moment,” he said.

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