updated on 27 Jan 2017
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Nifty will move from current 8600 to 9000? Analysis says so
The USA’s stock market index, Dow Jones Industrial Average, crossed its crucial resistance level of 20,000 for the first time in its history of over 100 years on expectations of robust corporate earnings and pro-growth policies from Donald Trump administration. The index has climbed more than 1,600 points since the day of US presidential elections.
The rally in the US markets is expected to have a rub-off effect on global markets, including the domestic market. In India, a seemingly pre-Budget rally has already taken the Nifty50 above its crucial resistance level of 8,600 as of Wednesday. If the bullish undertone of the US markets adds the domestic market, a rally in the Nifty50 towards the 9,000 mark cannot be ruled out.
President Donald Trump’s 'buy American and hire American' call has already rekindled expectations of pro-growth policies from the new US administration, while his emphasis on bringing back jobs to the US has created a stir in markets across the globe, especially emerging markets.
Relationship between US Dow Jones & Nifty50:
The correlation between Dow Jones and Nifty50 is very strong. Let's take a quick look at how both the indices have performed post the global financial meltdown in 2008.
While the Dow Jones eased from its 2007-08 high of 14,000 to around 7,100 in 2009, the Nifty50 saw its own set of challenges and slipped from 6,300 to 2,500 during the same period. Both the indices shaved off more than 50 per cent from their 2007-08 tops.
The recovery post these lows have been gradual for both the indices. The DJI has returned around 2.8 times from the previous bottom; the Nifty has passed it through with a 3.45 times rise
Similarly, the DJI or Dow Jones gained around 42 per cent from the previous top of 14,000, while the Nifty50 has risen around 36 per cent till Wednesday’s close at 8,600. This has been quite an outperformance with respect to other global equity indices