The Indian stock market has performed well so far in the current year, even though most other major indices continue to struggle to climb up. Equity has once again shown to be the superior asset class in the long term when compared to other asset classes.
Mounting recession fears, relentless rate hikes from major central banks, and ongoing geopolitical tension between Russia and Ukraine were all obstacles overcome by the Indian benchmark indices in 2022 to take the top spot.
Since a low of 7,511 in March 2020, the Nifty50 has risen 11,376 points or 151.45 percent to hit a lifetime high of 18,887 in December this year. Similarly, the S&P BSE Sensex has risen 37,945 points or 148 percent from a low of 25,638 in March 2020 to mark a record high of 63,583.
YTD, the Nifty and Sensex have risen nearly 4.31 percent and 4.26 percent, respectively.
The rally in domestic indices so far this year has amply proven that it is far ahead of its global counterparts. The domestic indices outperformed major global indices, including the US and Europe. US major indices, the Dow Jones Industrial Average and the S&P 500, fell 10.21 percent and 20.33 percent, respectively, so far this year, while the tech-heavy Nasdaq slumped 33.38 percent during the same time period.
The major European indices, the Dax, the CAC40, and the FTSE 100, have declined 13.33 percent, 10.62 percent, and 1.79 percent, respectively, in the current year so far.
Going forward, ICICI Direct Research has projected the Nifty 50 target for 2023 at 21,400, while strong support is set around 16,200 levels, and it also stated that Nifty would reach a massive height of 50,000 by the end of 2030, a CAGR of 13 percent.
Indian equities are likely to display the same rhythm that the US and Nikkei did in 1990-2000 and 1980-1990, respectively, i.e., delivering a decadal move of 5x on headline indices, the brokerage said in its technical outlook report dated December 19.
"Our prognosis of various technical studies leads us to the conclusion that the Nifty is poised to reach towards 50,000 by CY30. More so, the performance of 2021 and 2022 further adds strength to our argument given that Nifty is mimicking our forecast trajectory. What is more exciting is that we are entering 2023, which, as per decadal studies, has turned out to be a strong year," it said.
Having said that, the brokerage noted that such long-term trends often have to navigate through bouts of volatility. “For instance, in our CY18 strategy report, we projected the Nifty at 19,000 by 2022. Nifty achieved our target despite Covid-related volatility," ICICI pointed out.
Exhibiting the decade cycle, ICICI said, the Sensex gained an average of 4x (the median value) in each decade since its inception in 1979. The study helps investors to form a larger perspective and stay the course during times of turbulence, it says.
The brokerage outlined three key triggers for the Nifty50 to reach 21,400 by 2023 end:
Seasonality: Over the past four decades, third-year returns of each decade have been positive, with a median of 18 percent. CY22 projection based on this cycle of 18,900 has been achieved, adding credence to the cycle study. A similar target from a CMP of 18,420 projects target of 21,720. Additionally, 70 percent of the time a pre-election year has generated positive returns.
Conventional chart work: Breakout from the 13-month range (18300–15200) projecting 21,400.
Long-term breadth thrust: Over the past two decades, on eight out of 10 occasions, 60 percent of Nifty 500 constituents, rising above 200-day moving average (DMA), has triggered an average of 25 percent returns in the Nifty in the subsequent 12 months.
Meanwhile, ICICI is bullish on mid- and small-cap stocks over large-cap stocks. The relative outperformance of the midcap universe is in the mid-cycle of a multi-year bull phase. “We expect this outperformance to get further amplified over the next couple of years, and we expect to gain around 20% in CY23,” said the brokerage.
ICICI identified BFSI, auto, PSU, capital goods, infrastructure, and telecom as future focus sectors, adding that the IT sector offers a favorable risk-reward profile.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.