The Nifty Midcap index is on the cusp of a breakout from a well-defined falling channel encompassing the past two years' price action, which will be a classic bull market signal, it says.
Largecaps continued to outperform broader market indices in 2019, but technical setup suggests that midcaps are not far behind and may even be on the cusp of a new bull trend, ICICIdirect Research said in a report on December 19.
Domestic equity benchmarks scaled lifetime highs, and in the process, D-Street absorbed a host of domestic and global concerns, indicating robustness in price structure.
For many investors, though, it has been a mixed bag, as broader participation is still missing. “Our three-pronged approach reveals, a secular bull market is ahead of us, as midcaps are at the cusp of a new uptrend,” said the report.
Investors should align or construct their long-term portfolios to benefit from changing market dynamics with incremental weightage for quality midcaps, it said.
ICICIdirect Research prognosis for the Nifty is based on a projection from a two-year consolidation pattern implying a target of 14,000 that is concurrent with the bottom-up approach.
The two baskets of Nifty constituents--outperformer stocks and bargain buy stocks--command a total weight of 73 percent. “They are expected to generate returns in excess of 20% each, thus corroborating our bullish stance, derived from empirical studies,” the report said.
The Nifty Midcap index is on the cusp of a breakout from a well-defined falling channel encompassing past two years price action, which will be a classic bull market signal. Indian midcaps enjoy consistent positive correlation with global peers, with the latter being a lead indicator.
As US and European midcap indices are touching new life-time highs after two year hibernation, empirical evidence favours Indian midcaps following in their footprint
Market breadth, as measured by the percentage of stocks above the long-term 200-day moving average, has acted as a key determinant for forward returns.
ICICIdirect Research handpicks seven stocks that could give 19-38 percent returns in next 12 months. These are State Bank of India, SBI Life Insurance, Hindalco, Godfrey Phillips, RPG Life Sciences, PNC Infratech, and Persistent Systems.
State Bank of India: Buy| Target Rs 405| Stop Loss: Rs 267
Hindalco: Buy| Target Rs 250| Stop Loss Rs 185
Godfrey Phillips: Buy| Target Rs 1,740| Stop Loss: Rs 990
RPG Life Sciences: Buy| Target Rs 410| Stop Loss: Rs 258
PNC Infratech: Buy| Target Rs 249|Stop Loss Rs 158
Persistent Systems: Buy| Target Rs 890| Stop Loss: Rs 545
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