50,000 on Sensex and 15,000 on Nifty may be coming ahead of the Budget 2021

Market Outlook

The wait for 50,000 on the Sensex and 15,000 on the Nifty got extended last week when bears took control of the market and pushed benchmark indices towards their crucial support levels.

But experts feel that it is a healthy dip in a bull market and is not unusual as long as crucial support levels remain intact. According to them, bulls have a fighting chance to claim fresh highs ahead of the big event i.e. Budget 2021.

On the upside, 14,600-14,750 are likely to act as tough resistance levels on the way towards 15,000, while on the downside, crucial support for Nifty50 is placed at 14,400-14,000 levels

“On to intraday time frame, both Nifty and Sensex have formed a lower high and lower low sequence, which indicates that we could see a minor correction in the next few days. Immediate levels to watch out for are 14435 for Nifty and 49070 for Sensex,” Abhishek Chinchalkar, CMT Charterholder at FYERS.

If markets manage to surpass the highs of the week gone by, the bullish bias will resume. In such a case, we could see Nifty hitting 15,000 and Sensex 51,500 by Union Budget.

Even if the Sensex fails to touch 50,000 in the run-up, some experts feel that it could happen in the first half of February.

“We don’t expect Sensex/Nifty to hit 50,000/15,000, respectively, ahead of the event. But, we expect the market to pick up momentum post the big event taking direction from the reform plan as roll out by the government, and in mid-February 2021, we may see the market hit the Sensex/Nifty 50,000/15,000 level,” Ashis Biswas, Head of Technical Research at CapitalVia Global Research Limited told Moneycontrol.

Sensex Performance_001

What is fuelling the rally?

Strong global cues, consistent buying from foreign investors, stable December quarter earnings as well as the pro-growth expectation from the Budget 2021 are some of the factors fuelling the rally.

Foreign institutional investors (FIIs) have pumped in more than Rs 17000 crore in the cash segment of the Indian equity markets so far in January or in the run-up to Budget.

The expectations are running high after the Finance Minister indicated that it will be a pro-growth Budget. Even though the government has limited elbow room to provide the required fiscal boost to the economy. Although, D-Street seems to be factoring big bang reforms in economy-linked sectors.

“Given the backdrop of COVID-19 led disruption in the economy, the Union Budget is expected to come up with measures to soothe the pain. There is a need for counter cyclical measures to increase public expenditure to support economic recovery,” Gaurav Dua, SVP, Head Capital Market Strategy & Investments, Sharekhan by BNP Paribas.

Dua further added that within the financial sector, the government is expected to create a dedicated institution for infra financing and infuse capital in PSU banks to help kick start the economy.

What should investors do?

Investors should remember that 50,000 on Sensex is just a number or 15000 on Nifty50. And, one should avoid making investment decisions based on these psychological levels.

Yes, the valuations may look stretched but the liquidity wave could push benchmark indices to new highs.

“It is a wrong notion to say that the equity market is a reflection of the economy It is not. It is a reflection of only a good part of the economy. The market cap of sectors and companies doing well keep taking indices high,” Kunj Bansal, CIO, Karvy Capital told Moneycontrol.

“The non-performing sectors and cos market cap keep falling and their weightage in indices keep reducing. 50,000 is just another number like there was 10k, 20k, 30k etc.,” he said.

Investors should remain constructive on equities, and look at investing in sectors that are likely to gain from Budget 2021. There could be some initiatives to support urban poor especially from the disruption in the MSME sector, suggest experts.

Infrastructure, Real Estate, Construction, and Railways are some sectors, which may be in focus in the upcoming Budget 2021, Sharekhan said in a report.

“Valuations are not cheap anymore. Markets are anticipating a continued strong recovery in economy and businesses in year 2021 while the macro environment is expected to also remain favorable globally,” says Dua of Sharekhan by BNP Paribas.

“We remain constructive on equities in the medium term and would look at correction as an opportunity to accumulate quality companies. That’s because the set-up is favourable for the start of a new business cycle and earnings growth trajectory could be much better than anticipated over the next few years,” he said.

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