Nifty 50 Index Edges Higher As Investor Confidence Surges

Summary:
• The Lok Sabha elections are almost coming to an end, and the Nifty 50's performance is a reflection of the upsurge in investor confidence.

The Nifty 50 stayed on the ascending trajectory on Monday, inching up by 0.16 percent to stand at 22570 at the time of writing. The index’s recent hot streak goes back to May 10, underlining the resurgence of the market as the Indian Lok Sabha elections head to the final week. The market jitters seem to have cooled down, and investors are back on the grind, keen to capitalize on the positive forecasts for the Indian economy.

The Indian economy is forecast to grow by about  7 percent in 2024 , and many investors are upbeat that the end of the electoral cycle sets the stage for continued good returns from the securities markets. The month-long elections had set in an element of Fear, Uncertainty and Doubt (FUD) among foreign institutional investors, with their liquidations in May exceeding $3 billion.

However, the resilience of the domestic investors has been in play and has provided support to the markets amidst capital flight. Meanwhile, JP Morgan added India’s government bonds in its GBI-EM index, and that is likely to direct substantial inflows of more than $23 billion into the Indian securities markets beginning June 2024.

Looking ahead, the market could get fresh impetus when the HSBC India manufacturing PMI and Services PMI figures come out on Thursday. Also, in the long term, the Indian rupee’s strength will play a part in determining the trajectory of the Index. The rupee has strengthened significantly against the US dollar in May, and has gained 0.22 percent over it. That could impact India’s export market, and the Index by extension. Reserve Bank of India (RBI) is expected to keep the current 6.5 percent interest rates unchanged in its June meeting, and that could provide more support to the rupee.

Technical analysis

The Nifty 50 Index pivots at 22,535.25, and the momentum shows control by the buyers. A move past the first resistance 22,615.35 is likely if the buyers stay in control for an extended period. Furthermore, that momentum could see the index move further up to test 22,704.65. On the other hand, a move below 22,535.25 will signal control by the sellers, with the first support likely to come at 22,444.75. Furthermore, a continuation of that control could break the support and invalidate the upside view. Also, the resulting momentum could result in further downward action to test 22,371.10.