Nifty may cross key 20,000-mark  next  week

Mumbai: The Nifty hit a six-week intraday high before paring some of its gains led by financials and energy stocks with banking stocks witnessing renewed investor interest after the central bank announced discontinuation of incremental cash reserve ratio (ICRR) in a phased manner. The Bank Nifty outperformed the Nifty because of this.

Nifty closed up half a percent at 19819.95, the highest close since 20 July, while the Bank Nifty rose 0.6% to 45156.40, the highest closing in nine weeks after the RBI said it would wind up the ICRR by 7 October.

The ICRR of 10% is that portion of a bank’s net demand and time liabilities that it has to park with the RBI and which doesn’t earn any interest.

Analysts expect the spot Nifty index to test its record high of 19991.85 on 20 July next week and breach the 20,000 psychological mark.

Interestingly, Nifty futures contract expiring on 30 November breached that mark, closing at 20,088.

The incremental cash reserve ratio was introduced to absorb surplus system liquidity which rose, among other factors, due to the deposit of 2,000 notes into banks after the central bank decided to withdraw the high value notes in May. The removal frees up money which can be lent, which is seen as a positive for banks.

“Despite mixed global cues, the index bounced back to a seven-week high (closing basis) and is just 172 points away from its life highs,” said Siddhartha Khemka, head -retail research, Motilal Oswal Financial Services Ltd.

“Banking stocks saw renewed interest after RBI announced removal of ICRR in phased manner by 7 October. Niche sectors like power, defence and shipping continue to garner interest. Railway stocks were in momentum following media reports of potential deal to connect Gulf and Arab countries via railways.”

“With monsoon gradually improving and India set to host G20 summit over the weekend, sentiments are buoyant and may lift market towards its life high and 20,000mark over the next few days,” he added.

Rajesh Palviya, SVP (research) at Axis Securities, also expects Nifty to make a high next week led by “heavyweights” like HDFC Bank and Reliance.

The Nifty’s five top gainers were Coal India, NTPC, BPCL, Tata Motors and Larsen & Toubro, which gained 2-3%. Losers included UltraTech Cement, ITC, Wipro, TechM and Tata Steel which fell between half a percent and four-fifths of a percent.

The 18% rally in Nifty from 16,828 on 20 March to 19,820 on 9 September has been led by foreign portfolio investors who have invested $19.1billion so far this fiscal (FY24), after selling $23.6billion in the past two fiscal years.

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Updated: 09 Sep 2023, 12:06 AM IST

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