Market Update - July 2023

 

The Indian equity markets are currently at an all-time high with the Nifty crossing 19k for the first time in the last few trading sessions.

 

The Nifty PE ratio is currently 22.51 (average around 20). Below is a table of the Nifty PE ratios since 2000.

Source: PrimeInvestor

 

Looking at historical PE ratios the markets are currently more expensive than average.

 

Technical View of the Indian markets-

Nifty from Jan 21 to date (4/7/2023)

Source: TradingView

The markets had reached an All Time High (ATH) in Oct 21 with the Nifty at 18,604 (Point A in graph). It then corrected from there to about 15,200 on the Nifty by June 22 before swinging back up in Nov- Dec 22 (point B) and testing the previous ATH. There was a minor correction from there on till about March 23 with the markets now crossing those ATH’s (point D).

Note: Point C is the crossing over of the 50-day moving average and the 200-day moving average. When the 50-day crosses over the 200- day we consider it a positive (bullish) trend.

 

We look at some past instances in history where a similar pattern has repeated itself.

 

Nifty Graph Oct 13- Oct 17

Source: TradingView

Nifty PE ratio (at point D) April- 17- 23.37.

 

Market move post move out of resistance (i.e. moving out of point D to point E in graph below)- 23%

Source: TradingView

 

Nifty Graph Sept 06- Aug 15

Source: TradingView

Nifty PE Ratio April-14- 18.33

 

Move from Point D to Point E- 43.9%

 

Inference- 

When the Nifty crosses a multi-year ATH decisively, it is followed by a strong up-move. The current move looks very similar to previous moves. Since the PE ratio is on the higher side (relative to history) this move should be closer to the 2013-17 move with an expected upside above 20% at the end of the rally. That should bring us closer to 22k on the Nifty.

 

 

Disclaimer: The data/information compilation in the Market Review dated July 2024 is the Author’s comment on general trends in the securities market and discussions of broad-based indices. The information/data provided in the Market Review is not a research report as defined under the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 (SEBI RA Regulation, 2014). Thus, the Author is not required to have registration as a Research Analyst under the SEBI RA Regulation, 2014.

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