Hello reader, hope you’re doing well. The recent surge in the Nifty index from its March lows has injected a bullish sentiment into the market. However, labeling it as a full-fledged bull market proves challenging due to the current valuations, which hinder a sustained rally, and the evolving economic fundamentals, which cast doubts on the rally’s continuation beyond its current levels. Sustaining a prolonged bull run requires low valuations and a steady improvement in growth and earnings prospects. Unfortunately, the present valuations do not support such a scenario, and although growth and earnings prospects appear positive, they lack significant brightness. A case in point is the June auto sales figures, which fell short of expectations, highlighting the persistent issue of sluggish demand, especially for mass consumption products sensitive to price fluctuations. The recovery pattern also reflects a “K” shape, with premium products showing resilient demand while other sectors struggle.
Despite these challenges, the financial sector, particularly the leading private sector banks, offers some comfort in terms of valuations. Comparatively, the leading public sector banks present attractive valuations in contrast to their private sector peers. Moreover, the first quarter results of major banking players in the fiscal year 2024 are expected to be favorable. In conclusion, the recent Nifty surge has indeed brought a bullish mood to the market, but cautious optimism is warranted. The prevailing valuations and the evolving economic fundamentals may hinder a sustained rally beyond current levels. Nevertheless, potential opportunities lie in the financial sector, with leading private sector banks presenting favorable valuations and positive prospects for investors in the upcoming fiscal quarter.
Important points to note:
- 19500 levels to act as a key resistance zone for Nifty.
- Bharat Forge on crossing 845 levels can rally upto 885 levels in the short term.
- PSU banks have given a very good rally in the last 3 sessions, can look at some profit booking at these levels.
A tiny tidbit on true wealth for the day – True wealth: you are healthy, loved, clear-minded, you have time, you are fully enjoying your experience of life.
As always, risk management is key, and a proper system in place prevents one from losing out too much, in case of outlier events. Have a good trading day, and may the force be with you!
Disclaimer: this post is for educational purposes only, we are not SEBI registered analysts. Trades mentioned here are not trade recommendations. Equity Investments are subject to 100% market risk, please consult your financial advisor before investing.