10-15% upmove in NIFTY post-election?

As we have explained in last week’s post that Market has sensed Narendra Modi’s victory in 2024 lok sabha elections already and was ready for an upmove. That has already started to play out, even with much more ferocity than we expected. We were expecting the market to first take a breather of 2-3 days at around 22800, but due to FII buying rush, which seems a FOMO (Fear of Missing Out), it propelled to conquer even 23000 in a single day rally. Now the question is, what next?

Largely, people are considering no negative surprise and the government should continue. But what could be the target for NIFTY in case that happens? We will tackle this question in two possible scenarios:

1. Scenario 1: NDA doesn’t come to power – Then market will go to even high level of volatility with market crashing minimum 15%. It will be interesting to see how early that can bounce back. It might not be easy repeat of 2004 where markets crashed and, in few months, they quickly delivered the smart gains because there is high fear and doubt about the direction in which Congress wants to take the economy. So, putting these political aspects to rest as we have almost nil chances of Congress coming to power.
2. Scenario 2: BJP / NDA winns. Notwithstanding the margins of win, if NDA gets the seats which assures 5 years of stability, then markets are going to be in positive territory. We will assess the possible amount of positivity with all our logical formulations. However just note that, after the win is announced for NDA, markets may jump up and there could be sudden profit booking as well. This is because a large part of good news and election expectations are already built in prices of stocks. So, there might be investors who would like to reduce their exposure. But it is important that the market remains at about 22850. If it remains above 22850 even after profit booking, then it will be another story which we are going to discuss in this article.

So, let’s come to the point of possible returns should we have continuity in NDA government.

If we look at the below chart for Nifty, it is clear that zone up to 22800 was crucial resistance zone which has been broken very comfortably.

Now combine this information with the fact that US markets are on all-time highs, with interest rates also expected to go down in coming months. Geo political tensions are also in control (as of now at least). Earning growth for Indian companies have been good. The government is already focused towards spending on infrastructure, defense, manufacturing to say the least. All this augurs well for the equity markets.

All of the above factors are positive, however the biggest positive factors is yet to be put forth. This is based on some of the individual stocks and the RBI’s dividend that has been provided to the government. The government has got tremendous potential to increase the spending due to that and bond yields will also be expected to be in control due to that dividend, which will push up the financial sector to start with. Later the effect will be experienced by all the sectors.

Before I provide the final targets on Nifty that I am looking for, see some of the charts below. Look closely that these charts along with LT and TCS for which I have not included the charts, all look bullish with a few of them on the verge of breaking out. They contribute around 40% to the NIFTY, and all look positive from a multi-week perspective. Let’s then go to my final numbers for NIFTY

HDFCBank

Reliance :

ICICI Bank:

Infy:

Considering all these factors which are expected to collude to propel NIFTY to a far higher level. My immediate target is going to be around 25000 – 25300 range in the next 3 months. This is around 9-10% high than today’s levels of 22950. After this is achieved, it will be up to many global factors also should NIFTY wants to go for upward journey further. Comments are welcome.