Nifty headed for new all-time high; ICICI Securities tells when the index will break previous record

The benchmark index has bounced more than 50% from its March low but is still about 7% below its January record close. 

India’s NSE Nifty 50 Index is expected to reclaim its all-time high of around 12,400 by March as the V-shaped rally in stocks is likely to continue, according to the nation’s largest listed brokerage. “We do not foresee any major shift in the current directional positive bias,” analysts at ICICI Securities Ltd. led by Dharmesh Shah wrote in a note to clients. “Any correction should be used as an incremental opportunity to construct a portfolio of quality stocks.”

The benchmark index has bounced more than 50% from its March low but is still about 7% below its January record close. The gauge’s 50-day moving average has risen above its 200-day moving average forming a golden cross pattern, a bullish indicator for some investors.

The brokerage’s view is based on factors including historical data showing the Nifty completely retracing declines of over 25% within one year three times over the past 12 years. ICICI Securities also cited increased correlation between the Nifty and developed market indexes like the S&P 500 Index, which is trading at an all-time high.

Any correction should be used to accumulate more shares, Shah said, who sees support for the Nifty in the “major demand zone” of 10,400-10,600. Bank and consumer stocks now are likely to join the outperformance of software exporters, drugmakers, insurance, auto and chemical companies, he said.

ICICI Securities is even more bullish on smaller stocks. Indexes of small and mid-sized stocks have staged stronger recoveries from the pandemic selloff than larger peers, which some investors see as a sign of over overheating in retail investing. Despite such concerns, Shah argues that nearly 70% of Nifty 500 Index members trading above their 200-day moving averages points to the trend’s durability.

“We expect these indices to relatively outperform benchmarks,” he said. “Therefore, investors should utilize every dip to accumulate quality mid-cap companies.”