The Nifty50 is likely to close the year 2021 with the double-digit gains outperforming most of the other asset classes in the same period, and the good news is that the rally is not over yet, according to a quantitative study done by ICICIdirect.

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The index, which hit a fresh record high of 18,600 back in October, is likely to hit fresh record highs in 2022. The initial target is placed around 20,800 that translates into an upside of nearly 22 per cent from 17,072 recorded on 23 December.

The Nifty has moved above its long-term mean+2*sigma levels on multiple occasions in the past but has rarely sustained above it in the last 12 years.

“Moreover, it has managed to test its Mean+3*sigma levels for the first time since 2008. We believe it is a new trend in the making where Mean+2*sigma levels (currently near 15700) should act as a support, while the Nifty should achieve the target of its mean+3*sigma levels in coming months,” according to a report authored by Pankaj Pandey, Head – Research at ICICI Securities Limited.

“Extrapolating the current move further, we expect the Nifty to move towards 20,800 in coming months,” he said.

Sigma measures how far an observed data deviates from the average. In markets, investors use standard deviation to measure expected volatility from its mean. 

Investopedia defines 3-sigma limits as a statistical calculation that refers to data within three standard deviations from a mean. It is used to set the upper and lower control limits in statistical quality control charts.

The Nifty witnessed a major bull run in 2003-07 where it rallied from 1450 to 6420 levels in the span of the next four years.

The Nifty has moved largely in the band of its 2*sigma and 3*sigma levels for a major part of four years amid intermediate smaller corrections where the Nifty has found support near its 2*sigma levels on multiple occasions providing various entry opportunities.

After the sharp fall of 2020, the Nifty managed to move above its 2*sigma levels in late December 2020. Since then, it has remained above its 2*sigma levels

“We believe we are going to witness a multiyear positive move, where the Nifty will remain largely between 2*sigma and 3*sigma levels. The current mean+2*sigma levels is placed near 15700, which should act as immediate support for the index. With time, we believe it will move higher,” added Pandey.

ICICIDirect handpicks 5 stocks to bet on for 2022 based on quantitative methodology –

MindTree: Buy Range 4500-4620| Target Rs 5810| Stop Loss Rs 3925| Time 1 Year

Technology stocks have been one of the biggest outperformers in the post-Covid scenario. Mindtree is one of the few stocks in the midcap technology space, which is trading near lifetime high levels.

At the same time, the stock has largely remained above its mean+2*sigma levels. Also, considering the sharp-up move seen in the last couple of years, a round of consolidation cannot be ruled out.

ICICIdirect expects Mindtree to remain above its mean+2*sigma levels. Moreover, since the stock is likely to be part of NSE100 indices in the next rebalancing, additional fund buying in the stock is expected in the coming weeks.

RIL: Buy Range 2300-2360| Target Rs 2960| Stop Loss Rs 1990| Time Frame 1 Year

Reliance Industries has been finding support near its Mean+1*sigma levels since March 2017 on multiple occasions and has exhibited strong reversals.

Due to the recent market weakness, the stock has moved closer to these levels once again, which provides a fresh entry opportunity from a medium term perspective.

PVR: Buy Range 1290-1330| Target Rs 1680| Stop Loss Rs 1120| Time 1 year

PVR Ltd has exhibited a significant underperformance in the last many quarters due to the Covid-19 impact. Historically, mean levels have acted as trend reversal

levels for PVR.

Apart from the Covid scenario in the last two years, it has not spent much time below it. Currently, the stock is trading near its long term mean levels of 1350.

As volatility has also contracted in the stock compared to last year, there is a high chance of fresh momentum coming back in the stock.

SBI: Buy Range 445-460| Target 580| Stop Loss Rs 384| Time 1 Year

PSU banks found a new lease of life last year while sectoral leader SBI made fresh lifetime highs after a consolidation of more than a decade.

ICICIdirect believes that the stock is in a major uptrend and any declines remain a buying opportunity. Moreover, historically, mean+1*sigma has been a good entry opportunity in the stock.

Due to the recent market weakness, the stock has retraced towards these levels, providing a fresh entry opportunity.

Apollo Hospitals: Buy Range 4700-4820| Target Rs 6045| Stop Loss Rs 4095| Time 1 Year

Since September 2020, Apollo Hospitals has continuously found support near its mean+1.5*sigma levels. It has seen a sharp move in the last couple of months as expectations are building up for inclusion in the Nifty.

With liquidity flows likely to remain higher, stocks are likely to perform better. Currently, the stock is trading near its mean+1.5*sigma levels where we expect the stock to witness fresh buying interest.

(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.)