Market Outlook for Dec 2023 by Rakesh Pujara (Updated as of 22nd Dec, 2023)

US markets continued the Momentum by making new all-time highs. Federal Reserve paused hiking interest rates and are cautiously optimistic about the economy. Fed Rates are at 5-5.25%. Inflation is also around 3.2%, which is comforting and probably the reason why the Fed has paused hikes. Interest rates are back to 2007 levels. Liquidity conditions are tight and all leading indicators like Copper Prices, Crude Prices are beginning to show signs of revival and might trend upwards suggesting a further revival in the economy. There are some layoffs happening in the services sector which is a cause of concern. 

Dollar Index (DXY) is trading at 101.7 level after hitting 107 on the upside. That establishes a range between 100-107 with current price is moving towards the lower level. Any fall below 100 might trigger a sustainable rally in emerging markets. Any rise above 107 level might see all round selling in risk assets. Gold closed at USD 2052 after hitting all time high of USD 2148 level. As all timeframes are indicating bullish momentum in Gold showed some reversal after correction in the last few weeks, the stance remains positive and it might soon touch 2500 levels. Silver also reversed after giving healthy correction in previous weeks and should be accumulated at this level as Silver might outperform Gold in the recent future.

So, things are very moderately positive so far as international markets are concerned.

Coming back to Indian Markets, Nifty 50 managed to close at 21349(100 Pts. Away from All time high) after showing some correction in the week and India VIX at around 13.7is suggesting a benign environment. Nifty 50 Daily, Weekly, Monthly charts are suggesting positive trend. Momentum on daily, weekly and monthly charts are in bullish range and therefore Nifty may further move up in the times to come. We achieved first target of 21000 few weeks back and next target (22500) could be achieved by Election in May 2024, 12 months trailing EPS is Rs 936 and projected EPS of around Rs 1139 in FY 2024-25 is pointing towards 21800 levels presuming PE levels of 22, suggesting a pre-election rally. The rise may be straight up or after a decent retracement from the current level depending on various events that may play out in the coming quarters. On retracement the Nifty should not break 18800 levels on the downside or else all the hypothesis will be revisited. 

Bank Nifty also showed some correction in last week and closed at 47491. RBI also have suggested bullish stance in the last monetary policy while the rates remained unchanged. Bank Nifty might take a lead in the leg of market rise and likely to hit 52000 levels.

With state results of MP, Rajasthan & Chhattisgarh giving clear mandate to BJP indicates that people have voted for good governance, decisive leadership & stability in both state & General Election 2024. With these results, in 2024 general elections are likely to be elected the BJP government with a resounding margin and we will not be surprised if the cross 350 tally. Markets always likes stability at the center, good governance and continuation of existing policies. NIFTY 50 PE can get re rated opening up further substantial upside

On further analyzing the sectors of NSE, we found the following sectors to be strong. Also, the stocks showing relative strength to their respective benchmarks are mentioned below. 

1. Nifty Infra:  DLF, NTPC, LT, Gail, Ultracemco
2. Nifty CPSE: NLC India, NTPC, OIL, BEL
3. Nifty IT: LTTS, LTIM , Mphasis ,Persistent
4. Nifty PSU Bank: PNB , Bank Baroda ,Union Bank  , Can Bank 
5. Nifty Consumption: Trent, Colpal,Heromotoco ,VBL
6. Nifty Commodity: IOC, NTPC, Tata Power
7. Nifty Oil & Gas:  Gail, IOC, Oil, Castrol

Nifty Auto: TVS Motors, Bajaj Auto, Bharat Forge, Hero Moto Corp

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Please Note that Some of the Strong Stocks shown in the List could already be Long under our Smallcase (cwa.smallcase.com) & Advisory Services,
the list is not the recommendation to buy at current level.