Mega bull cycle on the anvil; ICICIdirect sees 21,000 on Nifty50 in 2022

The Nifty50, which has rallied by over 23 per cent so far in 2021, could see the further upside of another 20 per cent from current levels to hit a fresh record of Mount 21K, ICICIdirect said in a note.

Indian equities outperformed in CY21 riding a strong recovery post Covid lockdowns. History suggests that the mega bull run, which started in 2020, is likely to extend for a few more years with multifold gains.

The index is likely to rise by another 20 per cent amid volatility and intermediate correction but there will be stock-specific action.

“The Indian equities are in the initial phase of a multi-year structural bull market post last year’s resolute breakout above 2018 highs of 12,400. Going by the history of three decades, we expect the ongoing bull market to extend for the next few years with multifold gains,” Dharmesh Shah, Head – Technical, ICICIdirect, said.

“Our Nifty target for CY22 is 21,000 based on classical chart reading and bottom-up prognosis of Nifty constituents, wherein strong support exists at the 15,500 zone,” he said.

While the midcap space is expected to extend its outperformance, Shah expects IT sector to lead the rally supported by cyclical like Capital goods, BFSI, Real Estate, and Auto in the year 2022.

What Supports the Thesis?

There have been three mega bull cycles in the past 35 years, each measuring at least 2x price wise from major breakout and lasting for three to four years time wise.

ICICIdirect expects the Nifty50 to head towards 24,800 by CY24, based on empirical evidence. In-house breadth indicator of the brokerage house, which captures mega bull trends, has generated a rare bullish signal only for the third time in two decades.

Midcaps & Smallcaps to Shine:

Each of earlier two the signals (2004 and 2014) were followed by a multi-year bull phase. The relative outperformance of Midcap Universe is in the mid-cycle of a multi-year bull phase.

“We expect relative outperformance of midcap and small-cap universe to extend in the coming year going by historical evidence,” said the note.

As seen in earlier two instances, the outperformance cycle of Midcaps progress for a few years post falling channel breakout, initially led by Midcaps and then followed by smallcaps.

Further, each cycle witnessed a ratio challenging the previous cycle high. In the current cycle, post CY20 breakout, we are still midway to challenging the CY18 peak.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)