Nifty 50 Index Upside Prevails As Strong Fundamentals Provide Propulsion

Summary:
• Among other things, the Nifty 50 Index is moving up courtesy of domestic investors who are buying the dip after selloff by foreign investors.

The Nifty 50 Index edged higher on Friday, rising by 0.29 percent (64.50 points) to stand at 22466.30 at 7.20 UTC. A selloff by foreign institutional investors had put the index under pressure, with steep declines in the first nine days of May. However, having realized that the decline was not backed by a depreciation in the fundamentals, India’s domestic investors have leveraged the opportunity to buy the deep. This has seen the Index return to the upside over the last week, during which it has risen by about 2.4 percent.  

With the Indian economy remaining strong in an election year, investors are upbeat that the Indian stock market will continue rising well into the second half of the year. Furthermore, there’s confidence that the Bharatiya Janata Party will retain power. Hence, the policy continuity will ensure that investors do not suffer disruptions.

Beyond the happenings in India, the Nifty 50 is also likely to benefit from developments in the United States. With the US economy feeling the pressure of high interest rates, there’s rising probability that the Fed will announce rate cuts in the second half of the year, despite inflation remaining high. This is expected to help promote business activities not just in the US but also abroad, as foreign investors will likely inject more dollars into robust economies like India’s. Also, the US dollar has weakened in recent days, with the DXY at 104.6 as of this writing and that is likely to shift some investments from the forex market to equities.

Technical analysis

The momentum on the Nifty 50 Index points to control by the buyers, thereby signaling that we are likely to see a continuation of the upside if the Index stays above 22,363.65. There’s likely to be a barrier at 22,525.70, but a move above that mark could build up a stronger momentum to test the resistance at 22,615.35. Conversely, moving below the 22,363.65 pivot mark will signal control by the sellers, with the first support likely to be at 22,236.60. Furthermore, an extension of that momentum will favour the sellers to breach the support, and invalidate the upside narrative. At that point, there’s a good chance that the action could go lower to test 22,119 in extension.