Any September decline should be bought as Nifty set to breakout to 27,000: ICICI Direct

According to ICICI Direct, domestic markets may be in no mood to slow down, despite hitting record highs in recent months as the benchmark Nifty is poised for a multi-quarter consolidation breakout.

A brokerage note predicts that this breakout will lead to a significant rally in the next 6-7 quarters.

Positive global cues, coupled with strong FII inflows, contributed to a sharp 2% rally in the Nifty last week, taking it to 25,356. The index has gained nearly 36%, breaking around the 18,600 level.

ICICI Direct expects that the index is likely to achieve its historical trend with an estimated target of around 27,000 by March 2025.

Historically, September is a month known for volatility. In the last 19 years, September has seen the Nifty fall by around 3% on 15 occasions. Despite this volatility, the average three-month return after this decline has been around 7% with a success rate of 78%.

Brokerages, therefore, advise investors that any temporary pullback from here would provide an opportunity to increase exposure to Indian equities.

“The Nifty remains on track to our CY30 target of 50,000, as part of the decadal cycle projection and we upgrade our Nifty projection for FY25 to 27,000 as moderated by our composite model; with strong support at the 23,400 level,” it said.

On Bank Nifty, ICICI Direct indicated that outperformance is likely to resume, as evidence suggests that the Bank Nifty to Nifty relative ratio is bottoming out and is expected to lead to relative outperformance in the coming months.

This week, investors will be closely watching the US Fed meeting, as analysts expect the start of a cycle of interest rate cuts in the US.

“Structural changes in domestic inflows have helped mitigate the impact of FII selling by providing a deepening. Further, the return of FII inflows in the second half of the current calendar year, with prospects of a rate cut in the US, will be incrementally positive from a liquidity perspective,” the brokerage said.

A combination of medium-term market breadth and sentiment indicators point to broad-based participation in the current bull market, while volatility appears to be high, supported by strong domestic trends.

In the broader market, midcap and smallcap indices are in a structural uptrend and are expected to grow by 10-12% by the end of the year in a non-linear fashion.

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