Historic milestone: Nifty 50 crosses 20,000 points

In a historic moment for India's financial markets, the Nifty launched in November 1995 with a base number of 1000, surged past the 20,000-point mark for the first time on Monday afternoon. As celebrations followed with the ringing of the bell at the NSE (National Stock Exchange) at BKC in Mumbai, investors were both in celebration but also cautious, with talks of a correction already being discussed in a momentum market.

As the stock markets continued to show signs of flourishing, propelled by robust economic fundamentals and significant inflows from domestic and foreign sources, experts expressed optimism about the market's future trajectory. While the Nifty touched the 20,000 mark the Sensex topped 67,100 on Monday.

Nagaraj Shetti, a Technical Research Analyst at HDFC Securities, said, “We expect Nifty to move into new all-time highs beyond the 20K mark in the following days. The potential upside target of a larger triangle upside breakout comes around 20,100-20,200 levels for the near term.”

As of September 11, the NSE’s benchmark Nifty 50 index reached the significant 20,000-point milestone, marking a nearly 1 per cent increase from the previous close. This achievement underscores the resilience of India's benchmark share market indices, which have defied global concerns and subdued overseas cues to outperform their international counterparts.

Over the past week, the Nifty 50 and BSE Sensex have witnessed gains of over 2 per cent each. This remarkable performance can be attributed to solid domestic macroeconomic data, a brief respite in August, and unwavering support from domestic institutional investors.

Reacting to the developments, Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company, said, “Nifty at 20,000 is part of a journey and not a destination. Sitaron se aage jahan aur bhi hai. Where yesterday Sensex was, today Nifty is. Where today's Sensex is, tomorrow's Nifty will be there for long-term investors. However, in a momentum market, one has to be cautious.”

Recent high-frequency indicators, including Goods and Services Tax (GST) collections, private capital expenditure, credit growth, and the Purchasing Managers' Index (PMI) for August, have all signalled the continued strength of the Indian economy. This resilience has persisted despite high inflation, elevated interest rates, rising crude oil prices, erratic monsoon patterns, and global economic uncertainties that remain a concern.

Since the beginning of April, the Nifty 50 index has surged by an impressive 17 per cent, driven by inflows totalling over $18.9 billion. During this period, domestic institutional investors (DIIs) have also been active buyers, with net purchases amounting to Rs 33,397 crore. Meanwhile, the mid and small-cap indices have experienced even more substantial rallies, each rising by approximately 41 per cent and 47 per cent, respectively.

India's economy registered a growth rate of 7.8 per cent in the April-June quarter and is touted to expand by nearly 6.5 per cent in the current financial year, positioning the country as one of the fastest-growing major economies globally. The stock market rally comes on the back of foreign portfolio investors (FPIs) showing renewed interest in Indian stocks, having bought shares worth Rs 1.57 trillion ($18.93 billion) on a net basis in fiscal 2024. This marks a significant shift from the previous year when they were net sellers, divesting shares worth Rs 376.32 billion.

Though the popular theory is that the Indian stock market's recent achievements underscore the country's economic resilience and growing attractiveness to both domestic and foreign investors, observers have critiqued this to note that market dynamics can change rapidly, and investors should exercise caution and be prepared for a likely post-Diwali correction.