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Nifty mirroring rhythm of mega bull trend!

ICICIdirect Research 07 Jan 2023 DISCLAIMER

What's Buzzing 

The Nifty clocked a fresh all-time high of 18900 post 13 months’ consolidation breakout (18600-15200). Can this momentum continue and turn the tide into replication of a mega bull wave? 


Historically, the rare multiyear breakout from the ratio of the country’s equity benchmark vs. MSCI world index has opened the doors for multiyear relative outperformance of the respective country’s equity market against global peers, leading to mega bull phases producing a multi fold rally. In the current context, a similar breakout in the Nifty was observed on May 2022 at 16585. 

History of global mega bull trends 

Globally, ratio breakout post multiyear relative underperformance against MSCI world indices depicts structural improvement in respective markets. Empirically, such breakouts in Dow Jones, Hang Seng, Nikkei, Dax resulted in a multi-fold rally in respective markets (to the tune of minimum 3x returns) in the subsequent six years


History of mega bull trends in India 

  • Over the past four decades, there have been three mega bull trends in India during 1981-86,1990-92, 2004-08, with minimum 3x returns post ratio breakout 
  • In current context, a similar ratio breakout was observed during May 2022 at 16585. Thus, it projected minimum 3x returns from the breakout level of 16585 for the current decade 


Our Perspective 

The current breakout suggests that the Indian market is in an early stage of a multiyear outperformance with minimum projected target on the Nifty at ~50000 by CY30. Thus, secondary corrections from here on will provide incremental buying opportunity to accumulate quality stocks to ride the secular bull trend.

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