Stock market in Samvat 2078: Nifty seen at 19500 by March, likely to hit 21000 by next Diwali

November 04, 2021 11:47 AM

Technically, we remain positive on the Nifty for a target of 19,500 by March next year and 21,000 by next Diwali.

Nifty, stock marketsWe have seen sectoral shift at regular intervals which has helped the Nifty scale new highs. Image: Reuters

By Rahul Sharma

Markets and the economy have come a long way from where we were last year. Uncertainty and doubt have been replaced by optimism and positivity. Good quarterly earnings, decent monsoon, India’s vaccination drive, festival demand, consumer spending picking up and low-interest rates all have ensured that Nifty has stayed right on top in spite of some small periods of turbulence. Taking a top-down approach to understanding the current scheme of things – the primary trend of the markets is still bullish. On one side we have a buoyant US market backed by good quarterly earnings.

The Russell Index which represents the small businesses is on the verge of a new breakout indicating more upside. Europe saw the September dip get handsomely bought into and now is back to new 13 year highs. Such decadal breakouts play out for at least 3-4 years which should bode well for the equity space. Asia has been a mixed bag with Nikkei 225 consolidating at higher levels while China continues to underperform. India has been right there at the top and in spite of global weakness in September we have managed to stay afloat. We have seen sectoral shift at regular intervals which has helped the Nifty scale new highs. IT which was the best performing sector saw some profit booking while Metals have continued to remain sideways. Pharma Index has seen pullback too along with FMCG stocks witnessing profit taking. Midcaps and Small Caps continue their ride of their life with some mini corrections enroute.

The most recent correction of around 1000 points on the Nifty brings us into a favourable position to get into some good quality names for Diwali 2021. Supports for the Nifty are placed at 17,613 and 17,250. We can see 18,800 being tested shortly if we manage to get back above the 18,000 mark. Thematically, we are primarily bullish on four sectors in the medium to long term i.e.
1. PSE’s
2. PSU Banks
3. Realty
4. Consumption

PSE’s & Realty stocks are coming out of decadal underperformance and are witnessing reversals which can play out for next 2-3 years bringing in more wealth than what was destroyed in the last decade. Leadership is back to banks after a good 18-month period as the current quarterly results have shown that the worst of Covid is behind us. We expect this leadership to continue from here at least for the next 6-8 months. IT as a sector can be looked for booking profit as the technical indicators are highly overbought.

Money making may not be as easy as it was in the last 18 months where the entire market rallied into one of the best bulls ever witnessed. We are advising clients to be selective and play smart with sectoral allocation to reap the benefits of the move from here. Technically, we remain positive on the Nifty for a target of 19,500 by March next year and 21,000 by next Diwali. Dips and corrections if any should be good buying opportunities and if played well can help us make the most of what Samvat 2078 has to offer us.

Technical Diwali Picks 2021

(Rahul Sharma, Director & Head- Research, JM Financial Services Ltd. Views expressed are the author’s own.)

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