Nifty 50 Index Retreats After Scintillating Run, But Momentum Bubbles Under

Summary:
• The Nifty 50 Index retreated from the ATH streak on Thursday, but capital inflows continue coming into Indian equities markets.

The Nifty 50 Index receded further from all-time highs on Thursday, despite closing the day at 23,567 points, with gains of 0.2 percent. The Index had hit an intraday high of 23,624, 40 points of the ATH set on Wednesday. Indian stocks have been on a bull run since June 5, with the Nifty 50 index recording five consecutive all-time highs in two weeks. The index has recorded 33 new all-time highs in 2024, underlining the strong momentum in the equities markets.  The bullish sentiment has also been mirrored by the BSE Sunsex Index.

The recently-concluded Indian elections had put a strain on the performance of the equities markets, with foreign institutional investors liquidating billions of dollars worth of their assets. However, the successful conclusion of the elections, underlined by the return to power of Prime Minister Narendra Modi’s Bharatiya Janata Party brought in an element of reassurance among investors. The robustness of the Indian economy has been a key factor in the quick turnaround of the equities markets, and will likely keep providing fuel for further gains.

In late April, the International Monetary Fund revised upwards its growth forecast for the Indian economy is forecast to grow by 6.5 percent to 6.8 percent. Furthermore, ratings agency Fitch and the Reserve Bank of India have a much higher growth projection of 7.2 percent. The underperformance of the US retail sector in May is also good news for Nifty 50, as it has raised expectations of a Fed interest rate cut in September. The stock markets will also be impacted by the activation of the JP Morgan’s emerging market debt index in India starting late June.

Technical analysis

The momentum on the Nifty 50 index is currently in favour of the bulls, and the pivot is likely to be at 23,450. A continuation of control by the bulls look likely if they keep the index above that mark. In that case, the first resistance will likely be at 23,580, beyond which the resulting momentum could propel it to 23,620. On the downside, a break below 23, 450 will favour the sellers to take control, with the first support likely to come at 23,390. Furthermore, extended control by the sellers at that point will break the support and invalidate the upside narrative. Also, it could result in the Index going lower to test 23,250.