After witnessing a multi-year low level in March, the benchmark Nifty has shown a V-shaped recovery and has risen around 80 percent from those levels. The index turned positive for the year and is up over 11 percent YTD driven by improving sentiment.
Analysts expect this rally in the Indian equity market may continue in 2021 and any intermittent corrections should be utilized as buying opportunities.
“Nifty is expected to remain in a structural bull phase with upside target of 16,200 that is implied by the three year’s consolidation breakout (12,200-8,000),” ICICI Direct said in a report.
Within the bull phase, a normal correction of 15-20 percent cannot be ruled out, it added.
“However, such a correction should not be construed as negative. Rather it should be capitalized on as an incremental buying opportunity with key support at 11,400,” the domestic brokerage house said.
It expects midcaps to lead equity outperformance in CY21. It noted that the Nifty Midcap and Smallcap indices recorded resolute breakout from three year’s bear phase signaling a secular bull market ahead, as breakouts are further validated by strong breadth thrust.
“Indian midcaps and small caps have a strong correlation with developed market peers. As US and European midcap indices have already breached their multi-year highs, we expect secular outperformance to follow from Indian midcaps,” ICICI Direct said.
It also noted that over the past four decades, global equities have always generated positive returns in a year following US elections, wherein Sensex gained average 37 percent. This rhythm is expected to be maintained in CY21.
Infosys, United Spirits, Bharat Electronics, Relaxo Footwears are among ICICI Direct’s top picks for the year 2021.
Further, the brokerage expects emerging markets to outperform developed market peers.
“MSCI Emerging Markets (EM) index is breaking out of a decade long consolidation, after relatively underperforming developed markets (DM). Further, the relative placement of EM index with S&P500 is at a long term cycle low and is poised for reversal,” it said.
Meanwhile, a weak dollar has led the Nifty in dollar terms to break out of 12 year-long consolidation. India is expected to lead within the EM space as it stays key beneficiary of FII inflows, it said.
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