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The ship has just begun to sail for the next voyage amid the ongoing bull run on Dalal Street. Elara Securities believes that Nifty is set to hit the 19,600-mark in the medium-term and 24,400 in the long run. The 50-share index surpassed 17,300-mark for the first time ever on September 3 following firm global cues and sustained foreign fund inflows. The brokerage believes that some macro tailwinds from emerging market equities and currency trends appearing on charts signalling a favourable backdrop for robust targets over the next 4-6 months or 6-8 months.
“After extreme neglect of large caps by mid-July and exuberance in micro caps, a reversion of trade was underway. A bull market shakeout unfolded in small caps while large caps camouflaged it at the index level,” Elara said. The broader indices BSE Midcap and BSE Smallcap advanced have 7% and 5.50% in the past two months, while the BSE Sensex gained has 10% during the same period.
Elara Securities shared other key reasons which may support Indian equity markets going ahead. Have a look:
China factor
Elara further added that India may see robust inflows going ahead. It said, “The turbulence in China has been accompanied by resilience in EM ex-China trends. This trend is poised currently at a good launchpad for a durable takeoff. While India has 11.6% weight in the MSCI EM Index, the weight goes up to 17.4% for the ex-China version. This can be a catalyst for India flows.”
Dollar trips after short squeeze
The current relaunch of the EM bull market is accompanied by stalled trends in the US dollar. The recent push to 93.73 for DXY is mostly the top of the US dollar recovery. The retail shorts panicked at this fakeout, forcing them to cover all their shorts. “During the early part of the year, we had highlighted the entire planet was short on the US dollar. The bearish consensus has now fully reversed. This could well be the ripe point where the US dollar downtrend could begin,” Elara said in a note.
Rupee starts new outperformance trend with Asian currencies
The brokerage added that the new trajectory of outperformance for India’s equities over EM equities is now joined by a new trend of outperformance in the rupee. “The past two years’ underperformance of the rupee with Asian currencies is currently reversed, signalling increased probability of a new uptrend with prospects of a 5-6 appreciation first,” Elara said.