As expected the Nifty levels hit a fresh high as a result of the positive sentiments emanating from the election results. The market players like stability and after the results there was renewed FII buying. However, it was not a runaway rally as many had predicted for 2 reasons. Firstly, a lot of the possible BJP victory in UP had already been factored in. Secondly, there are some serious factors which will come into play in the medium term.
So to address the first issue, where does one see the Nifty in the next week or so? Given that the March expiry is next week both transactions and medium term fundamentals will be pertinent. From all technical analysis the Nifty has serious resistance levels at both 9180 and 9220. If it is able to cross both these points then it is likely to rally for a couple of hundred points more. However, in terms of probability that is rather unlikely and like this week, the markets will probably be range bound. On the down side Nifty has strong support at 9050 and again at 8975 levels. In case both of these break there is every possibility of a deeper correction in April. Again, in probabilistic terms this scenario is also not very likely and therefore, we will probably be in a range of 9050 through 9200 for most part in the week.
What about 2017 then? Well, many analysts believe that an overall growth of Nifty by 15-25 % in the year is possible. So, given that we started 2017 at levels of 8000, we should be able to get close to the 10000 mark. As usual, there are many factors that can make this happen or prevent it from happening. Here are some of the key ones.
- GST implementation from July 1st
- Monsoon performance and whether the EL Nino effect is a serious one
- US Fed rate hikes and impact of it on FII buying in our markets
- Earning growth showing positive signs finally in this FY
- Infrastructure spending by government to increase in the next 2 years or so
What is my call on the Nifty? Well, I think we may well get close to 10000 by the end of this FY but the path will obviously not be a linear one. There is a possibility of a sharp correction of about 10 % and that may well happen in the months of May and June, especially if the monsoon predictions turn negative and the GDP and IIP numbers show an unexpected decline. The route Nifty will take from 9100 now can well be as follows, though predictions are hazardous : 9100-9250-8700-8500-9000-9400-9200-9500-9700-10000. Each of the ranges may last for several weeks or months. While the route is tough to predict with any real degree of accuracy, I do think Nifty will end with 9700 plus by the end of this FY and may very likely get to 10000.
What does this mean for your investments this year and how should you plan them. Let me get back to this in another post.