Pre-election rally to take Nifty to 23400 levels by June this year: ICICI Direct

Nifty 50 touched all-time highs on February 2

A pre- election rally can take Nifty to 23400 levels by June 2024, according to a trading strategy report released by ICICI Direct.

With Nifty 50 touching all-time highs on February 2 after the budget day, there is wide anticipation of increased volatility ahead of the main event of the year i.e. general elections.

Nifty has given positive returns in each of the past 8 years. Market participants are eagerly anticipating another set year of good returns as the macroeconomic indicators strengthen in India aided by steady increase in aggregate demand in the country.

The ICICI Direct report gives the following reasons why it believes Nifty can rally to 23400 by June:

1.      Empirically, in a general election year, Nifty has a tendency to bottom out in February-March, followed by a minimum 14 percent rally towards the election outcome in each of seven instances over past three decades.

2.      Usual bull market corrections in Nifty are around 8 percent (multiple cycle average) followed by new highs. As 4.5 percent correction (from life high of 22124) is behind us, model indicate strong support in 20500-20800 which we expect to hold

3.      Bottom up chart study of Nifty constituents projects further upsides across sectors and heavyweights after many stocks coming out of large periods of consolidations, thus supporting bullish stance.

The report further highlights the percentage of stocks above 200-day moving average is above 80 percent even in corrective phase, thus indicating strong underlying strength, according to the Technical Strategy report by ICICI Securities.

So far this year, we have seen double digit gains in Nifty Oil & Gas, Nifty CPSE, Nifty PSE, Nifty PSU Bank and Nifty Energy index. Nifty Oil & Gas index is leading the current rally, up by more than 16 percent on year-to-date basis. Index heavyweight RIL is up by more than 12 percent on year-to-date basis while ONGC and IOC have soared by more than 25 percent.

On February 2 , the global markets traded with optimism even as S&P 500 made record highs and big tech companies contributed the most to the index gains.

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