A note from the brokerage predicts that this breakout will lead to a significant rally over the next 6-7 quarters.
Positive global cues, along with strong FII flows, contributed to a sharp 2% rally in the Nifty last week, bringing it to 25,356. The index has gained approximately 36% since breaking out around the 18,600 level.
ICICI Direct expects that the index is likely to achieve its historical trend, with a projected target of around 27,000 by March 2025.
Historically, September has been a month known for volatility. Over the past 19 years, September produced a dip of around 3% in the Nifty on 15 occasions. Despite this volatility, the average three-month returns following these dips have been approximately 7%, with a success rate of 78%.
The brokerage, therefore, advised investors that any temporary pullbacks from hereon would present an opportunity to increase exposure to Indian equities.”Nifty continues on the path of our CY30 target of 50,000, as part of decadal cycle projection and we upgrade our Nifty projection for FY25 to 27,000 as moderated by our composite model; with strong support at 23,400 levels,” it said.Regarding the Bank Nifty, ICICI Direct indicated that outperformance is likely to resume, as evidence suggests that the relative ratio of Bank Nifty to Nifty is bottoming out and is expected to lead to relative outperformance in the coming months.
This week, investors will closely monitor the US Fed meeting, as analysts anticipate the start of an interest rate cut cycle in the US.
“Structural shift in domestic inflow has helped mitigate the impact of FII selling, by providing depth. Further, return of FII flow in the second half of the current calendar year, with prospects of rate cuts in the US, would be incremental positive from a liquidity perspective,” the brokerage said.
The combination of medium-term market breadth and sentiment indicators points towards broad-based participation in the current bull market, while volatility appears to be plateauing, supported by strong domestic flows.
In the broader market, midcap and smallcap indices are in a structural uptrend and are expected to gain 10-12% by the end of the year in a non-linear fashion.
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