India’s Nifty 50 index has emerged from lows and is set for a rally that may go beyond 18,000 levels to as high as 24,000, according to technical analysis projections of two brokerages.
The NSE Nifty 50 index behaved as expected to surpass the target of 17,500 in August, according to a note by ICICI Securities. The brokerage has retained its positive stance with an upgraded target of 18,600 for the calendar year.
The upgraded target comes amid market momentum regaining steam after an eight-month-long corrective phase as well as a “Golden Cross”—when short-term moving average crosses the long-term reading, an indication of a bull run.
ICICI Securities expects the rally to be driven by relative outperformance of BFSI, IT, auto, capital goods and PSU stocks.
According to Edelweiss Securities, the current overbought conditions are backed by a strong thrust, which indicates a staircase for a new bull market.
“There is strong participation in broader markets that validates the bullish scenario and will witness strong momentum unfold once the Nifty surpasses the 18,150 resistance zone,” said Manav Chopra, charted market technician at Edelweiss Securities.
The upsurge in Nifty will lay the foundation for the target of 22,500-24,000 levels, the note said.
“The Nifty index could witness range-bound sessions with some pullback rally in the coming weeks as short-term charts are overheated and any higher base formation above 17,000-16,800 levels would be considered a positive signal,” Chopra said in the note.
A medium-term strong support zone exists at 17,000-16,800 levels, which the Nifty will defend in case of a pullback, he said.
“There is a buy signal in our proprietary Contra Buy Indicator and it’s a rare development,” Chopra said. “The indicator has marked all the key bottoms since 2004 and the index has not tested its recent bottom post the signal and witnessed a bull rally.”
Edelweiss Securities and ICICI Securities recommend buy on dips approach.
The broader market indices are expected to catch up with benchmarks as the Nifty Midcap Index has already given a breakout from the eight-month falling channel, ICICI Securities said.
The advancing stocks volume has outpaced declining stocks volume since demand overtook supply, indicating improvement in market sentiments, it said.
According to ICICI Securities, Indian equities are likely to perform well, supported by the positive correlation with U.S. indices, while benchmarks in both markets have signalled an end to the corrective phase and is expected to move higher in tandem.
Challenges Ahead
The upbeat technical analysis comes even as advanced economies stare at a looming recession, ripples of which are likely to hit Indian stock markets as well.
At the recently concluded Jackson Hole summit, U.S. Federal Reserve Chair Jerome Powell had made it clear that interest rates will be higher for a longer period to combat inflation. The European Central Bank is also mulling a 75 basis point interest rate hike.
Indian equity benchmarks have still not fully erased this year’s losses despite a surge since mid-June. The Nifty 50 closed 1.22% lower at 17,542.80 on Thursday.
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