The current market movement closely resembles the volatility seen during the Russia-Ukraine conflict, with a similar magnitude of correction. While the long-term outlook remains constructive, near-term uncertainties arising from global trade dynamics and geopolitical developments have led to a moderation in the FY27 target to 28,800.
The trajectory is unlikely to be linear, with intermittent bouts of volatility expected, although strong support is seen around the 21,200 level. In this backdrop, any short-term corrections are viewed as opportunities for investors to accumulate quality stocks and strengthen their medium-term portfolios.
The positive outlook is supported by several historical observations. Major corrections in bull markets have typically bottomed out near 17% and found support around the 200-week EMA, often followed by a median rally of about 30% over the next nine to twelve months.
Since 1996, instances of four to five consecutive months of market declines have been rare and have generally been followed by a 30% rally over the subsequent six to twelve months. Similarly, phases of exhaustion in India VIX have historically preceded recoveries, delivering returns of around 25% in the following six months.
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Over the past four decades, major geopolitical escalations have often coincided with market bottoms once uncertainty subsides, with such periods offering strong long-term investment opportunities.
Spikes in crude oil prices triggered by geopolitical events have also tended to be temporary, with easing prices often marking a point of market exhaustion and a bottom in equities. In the case of Bank Nifty, post-COVID corrections have typically stabilised in the 20% to 22% range, acting as a base for subsequent gains averaging around 30%.A meaningful recovery in market breadth is also seen as a key signal of a turning point, laying the groundwork for the next phase of growth. Additionally, a decline in the US Dollar index has historically been supportive for emerging markets, driven by expectations of increased foreign institutional inflows.
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ICICI Securities expects stocks such as Kotak Bank, Axis Bank, Bank of Baroda, Bajaj Finserv, South Indian Bank and SAM India to outperform. In the oil, gas and power space, it prefers Reliance Industries, HPCL, MRPL, NTPC, Tata Power and JSW Energy. Among other sectors, the brokerage highlights Bharti Airtel, Indoco, Elgi Equipment, Data Pattern, Syrma and NRB Bearings as potential outperformers.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)