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Nifty target: 17,400 by December; current rally a repeat of 2004-07 bull run?

Financial Express - Business News, Stock Market News

Midcap, smallcap, Nifty, Sensex stocksIn July 2021, India VIX, the volatility index fell to 13, which is significantly lower than the long-term average of 22. (Image: REUTERS)

NSE Nifty 50 index poised to hit 17,400 levels by December 2021, as volatility continues to reduce signaling the continuance of strong bull run, said Axis Securities. In July 2021, India VIX, the volatility index fell to 13, which is significantly lower than the long-term average of 22. This suggests a positive setup for the market with limited downside. The domestic research firm believes that if VIX continues to head southward, it will trigger a further rally in the broader market. Since November 21, 2020, smallcap and midcap stocks are picking up steam and are likely to deliver robust returns in 2021 as the economic uncertainties and volatility decline.

Is Nifty 50’s current rally a repeat of 2004-07 bull run?

Historically, Nifty had witnessed 10 bull phases. The average bull-phase return stood at 144 per cent with an average period of 27 months. The first bull run from 1990-1992 delivered a whopping 350 per cent returns in 22 months, following a 104 per cent rally in 1993-1994 (18 months), 17 per cent in 1997-1998 (20 months), and 113 per cent gains in 15 months from 1998-2000. Nifty 50 index surged 127 per cent during 2001-2004 in 28 months. During 2004-2008, in a 44 months period, it rallied 314 per cent, followed by 141 per cent in 20 months from 2009-2010. In another Nifty’s bull run, the 50-stock index surged 92 per cent in 2012-2015 and 72 per cent in 48 months from 2016-2020. In total, seven bull phases including the current one, Nifty has been up by over 100 per cent. While in the current rally, Nifty had given a return of 107 per cent in 16 months.

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Midcaps look attractive

From a valuation perspective, the midcap stocks look more attractive as compared to largecaps. The domestic brokerage firm noted that historically, midcaps traded at a 45 per cent premium to largecaps during the 2017 bull phase. Axis Securities added that the recent spate of IPOs and their success indicate the appetite for midcap and smallcap stocks. The stellar listing of Zomato IPO also signifies the euphoria among the investors and the strong risk appetite for novel and next-generation business models, it said.

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