5 tables & charts suggest Nifty can deliver solid returns in pre-election year

ICICIdirect sees Nifty at 21,400 in 2023. The target suggests 17 per cent upside over Tuesday's index level of 18,240. The domestic brokerage cited a host of historical and technical trends that hinted at strong returns for Nifty ahead.  

That said, the brokerage believes the upmove towards 21,400 would be non-linear. The corrective declines should not be seen as negative and instead should be utilised to build long term portfolio, the brokerage said.

Seasonality: With 2023 drawing near, the seasonality factor may come into play. The third year of a decade has always produced positive returns for benchmark indices with a median of 18 per cent return. In 2013, Nifty delivered a 9 per cent return; in 2003, it delivered a 73 per cent return; 1993 return stood at 23 per cent while 1983 return came in at 7 per cent.

Conventional chart work:  ICICIdirect said a Nifty breakout above 13-month consolidation (18,300-15,200) is signalling a shift to higher orbit with projected target around 21,400 in 2023.

Long-term breadth thrust: The outlook also looks positive as whenever Nifty's breadth indicator -- percentage of stocks above 200-MA, moves above 60 per cent level, 12 month forward Nifty returns have been in double digits with average return of 25 per cent. This has happened in eight of last 10 instances over the past two decades.

Election year: Nifty has generated positive return in seven out of the 10 instances. Out of the three negative return instances, two were during 1995 and 1998 when there was an unstable political scenario in India while the other one was during the Global Financial crises of 2008.

Long-term trend positive: The median decadal return for BSE Sensex since its inception in 1979 has been 4 times. In these four decades, there have been three mega bull trends in India, with a minimum 3 times returns post a rare breakout signal, said ICICIdirect in its latest technical report.  This rare signal, which got triggered in May this year, captures breakout on relative ratio of Sensex vs MSCI World. ICICIdirect said Dalal Street looks to be in an early stage of multi year outperformance with minimum projected Nifty target of 50,000 by 2030.

Meanwhile, key support for the index is seen at 16,200 as it is the 80 per cent retracement of the last six months up move (15,184-18,887). The level is near 100-week EMA of 16,270. Besides, in the last two decades, the magnitude of average secondary corrections are around 15 per cent, which also projects strong support around 16,050 level, ICICIdirect said.