Sensex at 85K, Nifty at 26K: Analysts expect some correction from higher levels

Indian equity indices closed at all-time high levels on Wednesday, as a late spurt helped the Sensex close above 85,000 and the Nifty above 26,000 for the first time. Analysts warn traders of some hurdles for these indices immediately but do not anticipate a sharp sell-off. The broader market indices, however, ended weak.

Nifty gained 0.3% or 63.75 points to close at 26,004.15, while Sensex advanced 0.3% or 255.83 points to close at 85,169.87.

“Since the markets are at all-time high levels, the resistance for Nifty is around 26,200 to 26,300 levels,” said Ruchit Jain, lead research analyst at 5paisa. “Short-term traders can book profits at these levels and take some money off the table.”

Both indices rose almost 2.5% in the past four trading sessions after the US Federal Reserve cut its policy rate by 50 basis points last Thursday. Analysts said the market could be overbought in the short term.“While there is no sign of a trend reversal, some price or time correction is likely as the relative strength indicator (RSI) is in the overbought zone in the near term,” said Jain. “If Nifty breaches the support level of 25,800 then there could be some pullback.”

Foreign portfolio investors (FPIs) net sold shares worth ₹973.94 crore on Wednesday, and their domestic counterparts bought to the tune of ₹1,778.99 crore.

In derivatives market, 75% of the bets of overseas investors are bullish after the US Fed’s interest rate cut, said Jain

The Midcap 150 index declined 0.6% while the Smallcap 250 index ended 0.4% lower on Wednesday. Out of the 4,065 shares traded on the BSE, 1,661 advanced, while 2,305 declined.

In the last one month, the mid-cap and small-cap indices gained 3.3% and 2.8%, respectively.

While markets are at expensive valuations, there is a lot of capital in India still to be deployed which remains supportive to the markets, said Sandeep Raina, executive vice president-research, Nuvama Professional Clients Group.

“Although Nifty could see a further up-move of 3% to 4%, a mild correction of around 500 points is likely, but it’s not a cause for concern,” said Raina. “The markets are likely to take further cues from the upcoming earnings season.”