Nifty 50 price forecast according to CLSA

Investing.com-- India’s benchmark Nifty 50 index is likely to gain in the coming months, with historical data indicating that the index usually performs favorably in an election year, CLSA analysts wrote in a note. 

The Nifty hit a record high of 23,110.80 points at the beginning of this week, although it then fell sharply from those peaks and was trading around 22,488.65 points by Friday.

Volatility in Indian stocks came in anticipation of the 2024 general election results, which are due on June 4.

No exit polls were permitted before the end of voting on June 1, but opinion polls conducted before the elections had predicted another victory for the incumbent BJP and its allies. 

Investors have largely welcomed the BJP’s pro-business policies, which included more support for the manufacturing sector and increased infrastructure spending. The Nifty has been a key outperformer among its global peers for the past two years, while the Indian economy has also seen outsized growth.

CLSA analysts said that looking back to the Nifty’s election year performance since 1991, the market had on average recorded returns of over 25% in election years. 

But they also noted that while the Nifty had managed to break out of a May-March trading range this week, a daily momentum indicator for the index showed some laggard performance going into the elections results next week.

They said the price set-up for the Nifty was similar to that seen before the 2019 elections, where the index had risen sharply in the immediate aftermath of the results (which were a resounding BJP victory), before seeing an at least 10% correction after a few weeks. But the Nifty still rallied into the year-end. 

CLSA analysts recommended taking profits around 23,745 to 23,750 points in the Nifty, in anticipation of a similar consolidation taking place after the 2024 results. 

They forecast the next resistance levels for the Nifty would be around 23,100, 23,745-23,750, and 24,000 points. 

In terms of sectoral positioning, CLSA analysts recommended sticking to the infrastructure sector over consumption on anticipation of stronger performance in the sector.