Nifty 50 Index Hits Record Highs, But Is A Correction Imminent?

Summary:
• The Nifty 50 Index Crossed the 23,400 points mark for the first time on Monday as buying appetite rises after historic Indian elections.

The Nifty 50 index hit new all-time highs on Monday, rising to 23,411.90 points before easing to 23,259.20 at the time of writing. The Index’s performance mirrors the rejuvenation in the Indian markets following the conclusion of a month-long election and the swearing-in of Prime Minister Narendra Modi for his third term. The Nifty 50 Index declined by 0.33 percent in May, the first monthly loss since January 2024.

Notwithstanding the decline in the performance of Modi’s BJP party, his win means a continuation of defined economic policies that investors have come to embrace. Foreign Institutional Investors had liquidated their positions in May, amidst election jitters, but Modi’s win is reassuring for most of them, as it almost certainly ensures limited interruption of familiar policies. Modi retained 19 of the previous Cabinet’s 30 slots, despite being in a coalition arrangement this time round. This underlines his intention to continue building from where he left, which is a confidence –booster to many investors.

However, after its recent rally, the Index could be headed for a cooling session as the Indian government prepares to release its budget for the next fiscal year. Much as Modi is expected to retain most of his previous policies, some level of interruption is expected, especially considering that the BJP is now in a coalition. That could see some investors ease their appetite for some stocks as they await the final budget reading before the end of July.  The Interim Budget had signaled a focus on MSMEs, energy and infrastructure, and many will be keen on changes made to the final document.

Technical analysis

The Nifty 50 Index will likely pivot at 23,210.25, from where the RSI signals that the bulls are likely to be in control. The first resistance is likely to be at 23,311.75 but a break above that mark could propel movement to retest the ATH of 23,411.90. Alternatively, a move below 23,210.25 will favour the sellers to take control. The downside movement will likely find the first support at 23,080.50, and a break below that mark will invalidate the upside narrative. Furthermore, it could build the momentum to test the psychological support at 23,000.