Nifty rally not over, previous bull runs hint index may hit 21,000; broader markets could outperform

NSE Nifty 50 bull-run is far from over as the new year 2022 dawns on Dalal Street.

Nifty
Nifty 50 has zoomed more than 21% so far this year and the set target would imply an upside of 22% from today’s opening levels.

NSE Nifty 50 bull-run is far from over as the new year 2022 dawns on Dalal Street. The Nifty index may hit 21,000 points in the upcoming calendar year, ICICI Direct said, drawing conclusions from previous bull-runs. “Going by the history of three decades, we expect the ongoing bull market to extend for the next few years with multifold gains,” the brokerage firm said in a report. Nifty 50 has zoomed more than 21% so far this year and the set target would imply an upside of 22% from today’s opening levels. 

Multi-year bull run

ICICI Direct in their yearly technical outlook for 2022 said that there have been three mega bull cycles in the past 35 years, each measuring at least 2x price-wise from major breakout, and lasting for three to four years time-wise. Based on this, among other factors, ICICI Direct believes the current bull run, which started in November last year when the Nifty was at 12,430, will extend north and reach 24,800 by the end of 2024. This would translate to doubling of the index from its November 2020 levels. 

The previous three bull runs noted by ICICI Direct were those of 1988-1992, 2003-2008, and 2008-2013. Each of these bull runs was preceded by a minimum 40% correction. “Subsequent mega bull markets extended for minimum 43 months wherein the index gained minimum 2x after resolving out of the previous high, thereby creating massive opportunities for investors with long term mindset,” ICICI Direct said. Going by historical reference, ICICI Direct expects the ongoing bull cycle from 2020 high of 12400 to continue over the next few years with a potential Nifty target of nearly 24,800 by 2024.

Corrections part of the rally

“Over the past two mega phases spanning two decades, an average transitory correction has been to the tune of 14%. Investing in such corrections and ignoring noise has been rewarding,” ICICI Direct said. Recently Nifty 50 corrected as much as 11% from its all-time high of 18,600. Analysts believe the current correction is behind and investors should now focus on building a quality portfolio in a staggered manner from a medium to long term perspective. Augmenting ICICI Direct’s view is their breadth indicator that measures market strength on longer degree charts. The indicator has generated a rare bullish signal in 2021, only for the third time in the last two decades. “In the previous two instances of 2003 and 2014, an indicator reading above 75 was followed by multiyear bull cycle.”

Broader markets to outperform

Studying the midcap and smallcap index charts, ICICI Direct believes the midcap and smallcap universe may extend gains. “As seen in earlier two instances, the outperformance cycle of midcap’s progress for a few years post falling channel breakout, initially led by Midcaps and then followed by smallcaps,” they said. 

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