Market's Ability To Reach New Highs Will Depend On This Factor | Decodes Market Expert

During the past week, the Indian stock markets made an attempt to reach new all-time highs but fell short, according to market expert Arun Kejriwal. The main indices heavily rely on the performance of a few large-cap stocks, and for new highs to be achieved, these stocks need to perform exceptionally well simultaneously, according to IANS report. However, the midcap and small-cap indices continue to surge and reach new highs.

As per Kejriwal, the benchmark indices experienced gains on two out of the five trading sessions, while two sessions ended in losses, and the remaining day saw a relatively flat performance. The BSESENSEX closed at 62,625.63 points, up 78.52 points or 0.13%, and the NIFTY closed at 18,563.40 points, up 29.30 points or 0.16%. The broader market indices, including BSE100, BSE200, and BSE500, recorded gains of 0.17%, 0.29%, and 0.40%, respectively. The BSEMIDCAP and BSESMALLCAP indices performed even better, with gains of 0.82% and 1.64%, respectively.

The report added that in terms of currency, the Indian Rupee depreciated by 16 paisa or 0.19% against the US Dollar, closing at Rs 82.46. The US Federal Reserve is scheduled to hold its policy review meeting between June 13 and 14, where a small interest rate hike is anticipated before a possible pause. The market's reaction will depend on how the Dow Jones, which gained continuously on the last four sessions, responds to the Fed's statement. The Dow Jones closed at 33,876.78 points, up 114.02 points or 0.34%.

The Reserve Bank of India (RBI), in its bimonthly policy meeting, decided to keep interest rates unchanged, with the repo rate remaining at 6.5%. The RBI emphasized its commitment to combating inflation and making efforts to bring it down. The interest rate differential between India's repo rate and the US Fed rate is expected to be at its lowest level in over 25-35 years. It is desirable for the Indian rupee to strengthen gradually to reduce forward cover requirements, which would be beneficial for the economy.

Although the benchmark indices failed to surpass their previous all-time highs set on December 1, 2022, the midcap and small-cap indices have been performing exceptionally well. The BSEMIDCAP index, for example, has been on an upward trajectory since hitting a low on March 28 and recently reached 27,847 points, a difference of 1,700 points or 6.5% from December 1, 2022.

As per market expert Kejriwal, looking ahead to the coming week, the outcome of the Federal Reserve meeting will be crucial for market sentiment. There are expectations of a rate hike this time. The market's ability to reach new highs will largely depend on the performance of heavyweight stocks. Two notable stocks that could provide a boost are Reliance Industries, which is expected to announce the demerger of its financial services division, and the HDFC Twins merger.