Nifty At 20000: Reflecting The Growth In India's Top Companies
Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.
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By Linus Garg
First publised on 2023-09-13 14:56:31
About the Author
Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.
View all posts by this Author
It took Nifty 21 years to move from its base of 1000 when launched in 1996 to 10000 in 2017. The journey from 10000 to 20000 was completed in six years. Since the stock market is largely driven by sentiment, the significance of Nifty crossing 20000 in intra-day trades on two successive days was not lost on market observers. Finally, it broke the barrier and closed above 20000 for the first time to end at 20070 on Wednesday, 13th August.
Nifty 50 is considered the bellwether of investor sentiment in India as it comprises of 50 of the biggest and most successful companies in India. Despite its rise, Nifty 50 is trading below the P/E multiple it had attained before the pandemic hit to disrupt economic activities. The BSE Sensex, on the other hand, which comprises of "the 30 largest, most liquid and financially sound companies across key sectors of the Indian economy that are listed at BSE Ltd." (as per the BSE website), is trading above its long term average. Also, there is no golden cross in overall stock charts yet. Hence, the potential for an all-round major rally does not exist.
In fact, Kotak Institutional Equities published a report a couple of days ago which says that mid-, and small-cap stocks are overpriced as of now due to excessive investor exuberance. It also dropped recommendation in the stocks in the two segments. The day after the publication of the report, mid-, and small-cap indices shed 3-4%, although they recovered marginally a day later. Since both the Nifty and the Sensex do not incorporate mid- and small-caps, there was no effect on them but the fact remained that the wider market is volatile. The other downside is that despite the Indian economy performing well, demand is not improving and sales are flat. Although Nifty 50 crossing the 20000 milestone calls for celebration, investors need to be careful and must make informed decisions when buying or selling stocks as even the RBI has successively lower growth projections for each of the remaining quarters of this financial year.
