Sensex rises half a per cent, crosses 75,000, Nifty 50 above 22,750: Is share market rally sustainable?

Sensex rises: Indian stock market is teeming with positivity. Equity benchmark the Sensex hit the coveted 75,000 mark for the first time on Tuesday, April 9 while the Nifty 50 also hit its fresh record high of 22,765.30. The BSE Midcap index, too, hit its fresh record high of 41,172.56 in morning trade.

Sensex has gained about 25 per cent in the last one year. In fact, it is up over 26 per cent from its 52-week low of 59,412.81 which it hit on April 21 last year.

Also Read: Sensex crosses 75,000 for the first time; Nifty 50 hits record high of above 22,700

Capitalmarket data show Sensex took 719 days, or nearly two years, to jump from 50k to 75k.

The overall market capitalization of BSE-listed firms has surged past ₹402 lakh crore, compared to nearly ₹265 lakh crore on April 21, 2023, the date of the Sensex's 52-week low. This translates to investor gains exceeding ₹137 lakh crore in just one year.

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Experts believe that buoyed by India's robust economic outlook and an influx of retail investors, the Indian stock market's record-setting spree may continue. The growing might of retail investors mitigates the risk of a crash even if foreign capital outflows occur due to a delay or modest rate cuts by the Fed.

Deepak Jasani, Head of Retail Research at HDFC Securities observed that the Sensex crossing 75,000 reflects the broad-based upmove in the markets triggered by flows from locals and abroad that were triggered by Indian macros that kept improving quarter after quarter in times when the world was facing multiple challenges of slow growth, high rates, geopolitical issues etc.

Higher allocation towards equities by investors and a whole new lot of investors entering the markets directly and through mutual funds also helped.

Expectation levels have been raised for a slew of reform measures to be announced in the first 100 days post-election. This hope is gradually getting discounted in the valuations.

"While the Sensex could witness normal consolidation/correction that may seem overdue unless the developing triggers are very negative, Sensex could bounce back soon after completing the correction. A larger correction (in terms of time and value) may happen a few weeks after the new government is sworn in," said Jasani.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services pointed out that the recent rally in India is led by fundamentally strong sectors like capital goods, automobiles, banking and metals.

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"The robustness of the Indian economy, the sustained capital flows into mutual funds and the enthusiasm of domestic investors can support the rally. However, the valuations of the smallcap segment are elevated and unjustified," Vijayakumar said.

KKunal V Parar, VP of Technical Research, Choice Broking is of the view that the current rally in the market has the potential for further gains, reminiscent of post-election periods in the past. Historically, the index has shown strong upward momentum following previous elections, and there's anticipation for a similar trend after the 2024 election.

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Parar observed that large-cap stocks are notably contributing to the Sensex's ascent, with many of them rebounding and providing significant support to the index.

Parar believes the optimism surrounding the incumbent government's electoral prospects and its commitment to capital expenditure bodes well for the overall economic growth trajectory. If these projections materialize, it could further fuel market sentiment.

From a technical perspective, Parar pointed out that the Sensex is navigating uncharted territory, maintaining an upward trajectory within an ascending channel formation and consistently remaining above its long-term moving averages.

"The outlook suggests the potential for further upside in the near term, with projected targets ranging from 78,000 to 84,000, while the support level is seen around 70,000," said Parar.

Shrey Jain, Founder & CEO of SAS Online said a new high at the beginning of the new year marks optimism of the market participants. In the run-up to the elections, the stocks are expected to rally. However, investors should never lose sight of external events such as geopolitical developments and rising crude oil prices. These can act as a dampener.

"Traders should ideally focus on large-cap stocks trading strong near 52-week highs with high volumes. Select names in auto, cement, and realty can reward traders. Avoid weak small-cap stocks for the time being. On Sensex, maintain a stop loss of 73,500 on a closing basis," said Jain.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.