The buying in the last month has seen equity benchmarks the Sensex and the Nifty regain more than half the ground they lost in the first half of 2022.
As the indices move upwards, analysts, too, are readjusting their projections. ICICI Securities, India’s second-largest full-time broker, upgraded its Nifty target to 17,500, which translates to a potential upside of 5 percent from the close of July 27.
“Over the past month, we have observed that rallies are now getting bigger along with shallow correction, indicating structural improvement that makes us confident to upgrade target from 16,600 to 17,500 for coming months,” the broker said on July 28.
The psychologically important mark of 16,000 remains strong support, it does not expect to be breached.
Analysts at ICICI Securities advise that dips should be utilised as incremental buying opportunities.
The rally has coincided with softening of crude oil prices and a lower inflation print in June. India VIX, an indicator of volatility expected in the market over the next 30 days, has cooled to 17-level, highlighting an improvement in the market sentiment that augurs well for the rally, analysts said.
A below-20 reading on India VIX is seen as supporting a stable market.
ICICI Securities said since the October 2021 peak of 18,600, on daily charts, there have been two occasions when the Nifty retraced 80 percent of the preceding corrective phase.
“At the current juncture, a similar breakout has panned out and we expect Nifty to maintain the same rhythm and head towards 17,500 which is 80 percent retracement of two-month decline (18,100-15,200),” it said.
The Nifty midcap and smallcap indices have mirrored the move in the headline indices.
ICICI Securities said that the breadth indicator, measured by the percentage of stocks above the 50-day moving average, jumped from 22 percent at the beginning of July to the current reading of 77 percent, indicating a broad-based nature of the rally that bodes well for the durability of the pullback in the broader market.
The bullishness expressed by the domestic broker is in striking contrast to the views of some foreign brokerages, particularly BofA Securities, which believes that an earnings cut is imminent and may spoil the party for the bulls.
BofA Securities said it remains cautious as there were early indications of a possible worsening of demand outlook. It sees several risks including slowing growth, adverse policy interventions, rupee depreciation and rising interest rates.
ICICI Securities said the relative rotation graph indicator projects IT and metals as bargain buys, while BFSI, auto and capital goods are outperformers in the current market scenario.
Its top picks are follows:
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