Nifty less than 200 points away from magical 20,000 mark; Is it time to book profits?

The Indian equity benchmarks had yet another record-breaking session on Wednesday with the Nifty 50 hitting an all-time high of 19,851.70 and Sensex surged as much as 376 points to hit record high of 67,171.38. With Wednesday's surge, Nifty 50 index came within the close vicinity of magical 20,000 mark. Analysts expect Nifty to hit 20,000 mark later this month on the back of strong fundamentals for Indian equities amid expectations of strong corporate earnings and robust fund flows from foreign institutional investors (FII).

FIIs have so far this month poured in Rs 36,971 crore in Indian equities, data from NSDL showed. Since the start of this financial year FIIs have invested Rs 1,39,588 crore after they pulled out record Rs 1,21,439 crore in 2022, NSDL data showed.

Is it time to book profits?

With the Nifty coming in close vicinity of 20,000 some analysts are of the view that markets are currently approaching overbought zone which suggests that a minor correction or consolidation could occur in the near term.

"The current uptrend in the Nifty is undeniably strong, and there is a possibility that it may surpass the 20,000 mark by the end of this month. However, it's worth noting that certain short-term technical and derivative indicators are approaching overbought levels, which suggests that a minor correction or consolidation could occur," said Santosh Meena, head of research at Swastika Investmart.

Nifty faces resistance around 19,800 and close above that could take Nifty to much higher levels.

"If the Nifty manages to sustain above this level, it could potentially reach 20,000 and even 20,200. Conversely, on the downside, 19,500 is a significant support level that is likely to provide strong backing in case of any downward movement," Meena said.

HDFC Bank, ICICI Bank to take lead market surge

Next leg of rally in Indian markets could come from heavyweights like HDFC Bank, ICICI Bank and Larsen & Toubro following a surge in IT stocks from lower levels.

"Following a robust surge in IT stocks from lower levels, there is a possibility that HDFC Bank, ICICI Bank, and Larsen & Toubro could take leadership and gain momentum in the near future. These stocks have the potential to catch up and make significant strides," Meena said.

Siddhartha Khemka, head - retail research at Motilal Oswal expects the bullish momentum to continue for markets given buoyant domestic cues and receding global concerns.

“We expect this momentum to continue in the near term given buoyant domestic cues and receding global concerns. Tomorrow, markets would react to the weekly option expiry and results of index heavyweight Infosys and HUL,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal. 

 Meanwhile, Meena said that the current market conditions appear to be more favourable for buy-and-hold traders rather than day traders. Chasing after a rapid upward movement can be challenging, as it may lead to missed opportunities or increased risk. 

“Investors with a long-term outlook should consider utilising these moments of temporary price declines to accumulate positions in stocks or other assets they believe in. By adopting a buy-and-hold strategy, investors can take advantage of the overall upward trend and potentially benefit from the market's long-term growth potential,” Meena added.