Top 9 Techno-Funda Stock Picks for CY23 by ICICI Direct

Nifty @ 21400 in CY23 as per conventional methods…. Nifty’s Decade: CY30 Target @50000

Technical Outlook: Nifty CMP – 18420

► India’s decade, ride with conviction

History does not repeat but it rhymes: Indian equities are likely to display the same rhythm that the US and Nikkei did in 1990-2000 and 1980-1990, respectively, i.e. delivering a decadal move of 5x on headline indices. Our prognosis of various Technical studies leads us to the conclusion that the Nifty is poised to reach towards 50000 by CY30. More so, the performance of 2021 and 2022 further adds strength to our argument given the Nifty is mimicking our forecast trajectory. What is more exciting is that we are entering 2023, which, as per decadal studies, has turned out to be a strong year

Such long term trends often have to navigate through bouts of volatility. For an instance, in our CY18 strategy report we projected Nifty @ 19000 by 2022. Nifty achieved our target despite Covid related volatility

i) Decadal cycle: Since inception in 1979, the Sensex gained average 4x in each decade. From CY20 close of 13981 (Nifty) similar projection leads to ~56,000

ii) Relative ratio breakout against MSCI world: In each of the three earlier instances, ratio breakout was followed by the index gaining at least 3x post breakout (current breakout in May 2022 at 16585, projects 50,000 for the Nifty in the current decade)

Globally, across the US, Europe and Asian markets, similar ratio breakouts over past four decades, were followed by minimum 3x returns over the years

CY23 Target @ 21400

► Prognosis for CY23

The Nifty target for CY23 is placed at 21400 while strong support is placed at 16200 levels. Our prognosis is well supported by:

a) Seasonality: Over the past four decades, third year returns of each decade have been positive with median of 18%. CY22 projection based on this cycle of 18900 has been achieved, adding credence to the cycle study. Similar target from a CMP of 18420 projects target of 21720. Additionally, 70% of the times a pre-election year has generated positive returns

b) Conventional chart work: Breakout from 13 month range (18300-15200) projecting 21400

c) Long term breadth thrust: Over the past two decades, on eight out of 10 occasions, 60% of Nifty 500 constituents, rising above 200 day moving average (DMA) has triggered average 25% returns in the Nifty in subsequent 12 months

► Mid/small caps to outperform large caps

Relative outperformance of midcap universe is in mid-cycle of a multi year bull phase. We expect this outperformance to get further amplified over the next couple of years, and gain around 20% in CY23.

Sectors in focus: BFSI, Auto, PSU, Capital Goods & Infra, Telecom while IT provides favourable risk reward