History shows momentum rallies lift Nifty 25% in 134 days; will it repeat?

Based on the average gain and duration of the past momentum-driven rallies, the NSE Nifty 50 can potentially rally past the 23,000-mark by January 2024.

Despite concerns over stretched valuations, high interest rate regime, and slowdown in global economy, the equity markets have been on a roll off late. The S&P BSE Sensex and NSE Nifty 50 have notched up record highs and were quoting above the 67,000-mark and 19,800-level in early deals on July 19.

The NSE Nifty 50 has rallied almost 5 per cent ever since the 50-share index conquered its December 01, 2022, summit of 18,887.60 on June 28, 2023. In the last 14 trading sessions, the NSE benchmark has registered a new peak on 10 occasions.

Notably, the markets have witnessed such rallies in the past too. For instance, in the year 2021, the Nifty had logged 42 new highs in a period of 99 trading sessions, starting from May 28 till October 2021. In the process, the Nifty logged a gain of 20.5 per cent.

Similarly, from November 09, 2020 to February 16, 2021, the Nifty clocked a gain of 22.9 per cent in mere 138 trading sessions - registering 42 record highs during the period.

Overall, there have been five such instances since November 2005, wherein the Nifty 50 has managed to scale a new high on an average at least once in every four trading sessions.

The longest streak was from March 07, 2014 to March 04, 2015, wherein the Nifty 50 logged 67 new highs (also the most so far) in a period of 242 trading days, surging 36.7 per cent during the period. On the flispdie, the shortest time-frame and net gain was from September 19, 2017 to January 08, 2018; wherein the NSE benchmark registered 29 record peaks in mere 77 trading sessions, but eventually was up only 4.7 per cent.

However, if one were to look at the average per centage gain and number of trading sessions during such frenzied bull-run, data shows that the Nifty 50 has gained an average 25.1 per cent in 134 trading sessions, with a possibility of 47 new summits during the period.

Going by the math, if the Nifty was to gain up to the average mark of 25 per cent, the index could very well rally past the 23,000-mark by January 2024 (considering the average number of trading days in past).

Further, if one were to the ignore the lowest gain of 4.7 per cent, the next notable gain stands at 20.5 per cent in 99 trading sessions. This implies a possible upside target of 22,800 within five months. 

Lastly, the highest gain was recorded between November 26, 2005 and May 11, 2006, wherein the index zoomed 40.6 per cent in a matter of just 113 trading sessions (approx. 6 months). A similarly proposition could see the Nifty 50 top the 26,500-level.