Sensex, Nifty set for flat opening despite US strength; Analysts caution on valuation concerns

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Domestic markets are expected to open on a flat note on Thursday, indicates Gift Nifty trading. Despite a strong close in the US markets overnight, Asian stocks are mostly down. Gift Nifty at 17650 signals a positive bias at the opening. 

Analysts expect the market to remain in consolidation mode, given the valuation. They expect long-term investors to accumulate stocks at lower levels that will protect the market from any sharp downside. According to analysts, with the inflation coming down in India and the US, the market is ready for further up-move.

Vinay Paharia, CIO, PGIM India Mutual Fund, said: We remain cautiously optimistic on the market from a medium-term perspective. We caution because markets are trading at a premium to their current fair value. However, this fair value is likely to grow at a strong pace in the medium-term, hence we remain optimistic from a medium to long-term perspective.”

Ajit Mishra, SVP – Technical Research, Religare Broking, said Nifty has decisively crossed the trend line hurdle and looks set to test 19850 now. “ Interestingly, noticeable contributions from heavyweights like Reliance, Infosys and TCS, which were on the sidelines, largely fuelled the up move. And, we expect their participation to continue thus reiterating our view to maintain a “buy on dips” approach and focus on stock selection.”

Globally, according to Vinay Paharia, “we are seeing growth slow-down in developed markets due to elevated interest rates along coupled with sticky inflation situation.” This will have an adverse impact on export-oriented businesses. In India, the uptick in discretionary demand in the ongoing festive season and measures by the government to boost rural consumption are key near-term monitorable factors. As we inch closer to 2024, we will see increased volatility due to the Union Elections scheduled in May 2024. “We are of the view that these are transient factors and would advise long-term investors to look beyond these near-term headwinds to benefit from the long-term India story,” he added.