The benchmark Nifty has rallied almost eight percent in the last four weeks and scaled a fresh all-time high of 16,712 in tandem with global peers.
The rally was mostly led by large-caps which are likely to continue to outperform and lift Nifty towards 17,000-17,200 in the coming month, domestic brokerage house ICICI Direct said.
Over the past 15 months, the “buy on drop” strategy has worked well and the brokerage advocates sticking to the same strategy. It is of the view that a temporary breather after the recent rally would present an incremental buying opportunity to build a quality portfolio from a medium-term perspective.
“The Nifty has rallied eight percent over past four weeks that hauled weekly stochastic in overbought territory. Thus, any cool off from here on should be capitalised on as incremental buying opportunity to ride the next leg of an up move towards 17,000-17,200 in coming months as it is price parity of past two rallies seen during CY21,” ICICI Direct said in a report.
Since January 2021, Nifty has twice seen 1,800 points rally. In the current scenario, Nifty would complete 1,800 points at 17,200 projected from June low of 15,450, it added.
“The formation of higher peak and trough signifies the continuance of positive bias which makes us confident that index would resolve higher and gradually head towards a revised target of 1,7000-17,200 in the coming month.”
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Meanwhile, after a sharp rally of more than 10 percent in the past two months, the broader market underwent profit booking and Nifty Midcap and Smallcap indices dropped two percent and five percent, respectively.
“Key point to highlight in the broader market is that the Nifty midcap and smallcap indices have breached the previous month’s low for the first time after 16 months as they witnessed stupendous rally since April 2020, indicating a pause in upward momentum,” the report said.
Hence, this healthy consolidation is expected to make the larger trend more healthy and analysts believe dips should be capitalised on as an incremental buying opportunity.
Further, Bank Nifty witnessed an extended consolidation in the 34,500-36,300 range during the previous month thus forming a base for the next leg of up move.
“We expect the index after the recent healthy base formation to break out above the upper band of the range (36,300) and head towards 37,700 levels in the coming month as it is the confluence of the measuring implication of the recent range (36,300-34,800) and the previous all-time high of February 2021.
Amid the Bank Nifty index as well, the brokerage said, the current breather would offer incremental buying opportunity in quality banking stocks.
