“We reiterate our constructive stance and expect the Nifty to challenge the all-time high of 18,600. Eventually head towards 18900 by December 2022. In the process, bouts of volatility owing to global uncertainty cannot be ruled out. Thus, dips should be capitalised on as incremental buying opportunities,” ICICI Securities technical analyst Dharmesh
Shah said in a report.
The report cited 6 key reasons behind the positive stance:
1) Breakout from 12 month’s falling trend line confirms the conclusion of corrective bias, in turn, suggesting a resumption of the primary up trend.
2) Historically, over the past two decades, Q4 returns for the Nifty have been positive (average 11% and minimum 5%) on 15 out of 21 occasions (70%). History favours buying dips from here on.
3) On the structural front, the BSE PSU index logged a resolute breakout from a decade-long downward slanting channel, indicating a structural turnaround.
4) India VIX, which gauges market volatility, has recorded a five-month range breakdown and is trading around 16, indicating a low-risk perception among market participants.
5) Indian equities continued to relatively outperform their global peers, showing inherent strength.
6) The US Dollar/INR pair retreated from the upper band of the long-term rising trend line placed at 83.30, while the Dollar index has faced stiff resistance from decade-long resistance trend line.
While describing buying the dips as a prudent strategy, the brokerage said, “According to the past two decade’s seasonality, buying in September-October has been rewarding on 16 out of 22 occasions, as Q4 calendar year returns have been positive to the tune of average 11% However, such a move has been non-linear.”
It also expects to catch up with activity against the benchmark in the midcap index and eventually head towards an all-time high of 33200 levels in the coming months.
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