Indian Stock Market Scales New Heights on Q4 Earnings Optimism

The Indian stock market soared to unprecedented levels on Tuesday, with the benchmark Sensex index breaching the historic 75,000 mark for the first time. This upward surge extended to the broader Nifty 50 index, which surpassed the 22,700 level in early trade.

Momentum Across Sectors

The rally enjoyed widespread participation across sectors, with Nifty Realty, Nifty Auto, Nifty IT, and Nifty PSU Bank experiencing the most significant gains. This broad-based uptrend underscores the robust health of the Indian market.

Earnings and Macroeconomic Optimism

Strong domestic economic fundamentals and positive global cues fueled the market’s ascent. Investor sentiment remains buoyed by the anticipation of robust corporate earnings for the fourth quarter (Q4) of FY2024. This optimism outweighs the recent rise in gold, crude oil, and metal prices.

Experts’ Insights

Market analysts attribute the current uptrend to the expectation of stronger-than-expected Q4 corporate earnings. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd., suggests that this optimism has been driving market momentum for the past week. He further anticipates strong domestic growth in the first half of FY2025 due to increased consumption demand fueled by election-related spending. This scenario bodes well for the market, with a focus on large-cap stocks offering a combination of earnings security and attractive valuations.

Global Cues and Future Outlook

While Asian markets exhibited positive movement, US markets closed flat after a volatile session. Investors now await the release of the US Federal Reserve’s monetary policy meeting minutes and key US inflation data for further guidance on the timing and extent of potential interest rate cuts.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, observes a distinct bullish pattern in the Indian market this year, characterized by “higher highs and higher lows.” This trend has favored investors employing a buy-on-dips strategy. The record highs achieved strengthen the market’s bullish undertone. Notably, the outperformance of large-caps indicates a healthy market movement. Vijayakumar believes that large-cap banking stocks offer valuation comfort in this richly valued market. Additionally, he expects strong Q4 results from major banking institutions. Sectors like capital goods, automobiles, cement, and hospitality are also likely to demonstrate resilience.

Technical Analysis

On the technical front, the Nifty 50 index is displaying strength around the 22,700 mark. Analysts anticipate that the Bank Nifty will maintain its position near 48,650. Experts predict continued upward momentum for the Nifty throughout the day. Any corrections towards the 22,550 level might present entry points for fresh long positions. Options data suggests potential consolidation in Bank Nifty near current levels.

Shrey Jain, Founder and CEO of SAS Online, emphasizes a positive outlook as long as the Bank Nifty remains above the 48,000 threshold.