Nifty hits 25,000: Next 5,000-pt rally could be led by banks, IT, autos

Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities suggests that for the Nifty50 index to move up from the current levels, bank and IT sectors need to perform and do the heavy lifting

Nifty hits 25,000 mark, Sensex hits 82,000: The Nifty 50 index hit the 25,000-mark for the first time ever on Thursday, August 01, 2024. The index had hit the 20,000 mark for the first time ever on September 11, 2023, and took 221 trading days from that level to hit the 25,000 mark on August 01.

While the last 5,000-point rally in the Nifty was led by gains in auto, metal and oil marketing companies (OMCs), (FULL LIST HERE) the next 5,000-point rally that can take the index to the 30,000 mark, analysts believe, will be led by the sectors (such as banking) that have not participated much till now.

“Banking, financial services and insurance (BFSI), information technology (IT), oil & gas and auto sectors are key if the Nifty50 is to cross the 30,000 mark. Smaller sectors and the ones that already did well in the recent past can chip in, but do not have enough power in them alone to do all the heavy lifting. Foreign flows will also matter, which should return with a greater force in the months ahead,” said U R Bhat, co-founder & director at Alphaniti Fintech.

At the bourses, meanwhile, the Nifty50 has gained nearly 15 per cent thus far in calendar year 2024 (CY24). Mahindra & Mahindra (M&M) and ONGC have been the top gainers that surged over 60 per cent during this period.

Bharat Petroleum Corporation Limited (BPCL), Adani Ports, Tata Motors, Power Grid, Bharti Airtel, Shriram Finance, Bajaj Auto and Coal India have been the other gainers that moved up 38 per cent to 56 per cent during this period, ACE Equity data shows.

IndusInd Bank, LTI Mindtree, Asian Paints, Nestle India and Bajaj Finance, on the other hand, have been among the top losers.

Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities, too, suggests that for the Nifty50 index to move up from the current levels, bank and IT sectors need to perform and do the heavy lifting.

“It is time for the pharma sector, too, to start performing. Though it does not have much weight in the Nifty50 index, a lot of pharma stocks are up for rerating. On the other hand, capital goods (especially power sector), defence and railway-related stocks have done well recently and could underperform. Investors can take money out from them and deploy it in banks and IT,” he suggests.

Global cues: US elections, Fed rate cut

That said, global geopolitical situation, US election outcome and the interest rate trajectory, analysts believe, will play a key role in how most equity markets are likely to shape up in the months ahead.

A rate cut by the US Fed in its upcoming meeting in September, they said, is mostly priced in by the markets. A disappointment on that front could see global financial markets course correct.

“The US Fed is on the brink of cutting interest rates in September. If it doesn't, it risks failing in its duties and would spook markets. That said, investors are optimistic. Inflation readings have been slower, boosting expectations for a rate cut. The Federal Open Market Committee (FOMC) has kept the federal funds rate at 5.25 per cent to 5.5 per cent since July 2023, but we are now heavily favoring a quarter-point cut in September,” said Nigel Green, CEO of deVere Group – a global consulting firm that has nearly $12 billion worth of assets under management.