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Time of India

Nifty target 26,300 through summer; 3 sectors to lead sector rotation: Laurence Balanco

Laurence Balanco , Technical Analyst, CLSA , anticipates new highs for the Nifty , targeting 26,300 by summer, followed by a potential consolidation and a move towards 37,000. The market is experiencing rotation into lagging spaces like smallcaps, increasing participation breadth. Financials remain a key leader in the structural uptrend , with real estate and PSUs also expected to contribute to sector rotation . DAX, CAC, the S&P, all are making record highs. What is the screen telling you? Laurence Balanco : We have seen the rest of the world outperform the US since the April low. So, despite the S&P having a meaningful rebound, it really has been the rest of world indices from the ASX 200 to the DAX outperforming the US and you can throw the breakdown in the US dollar as an additional factor generating this relative outperformance. We still see positive price action in the Nifty. The Nifty itself has completed this double bottom pattern that trades back to 26,300. So, new highs for the Nifty is what we are looking for. Back home in the Indian markets, you have been bullish since April after that double bottom formation. But now that the markets are above that 25,000 mark, where do you see the markets headed because the RBI rate cut push on the fundamental side gives a boost to the markets as well. At this price point, should the market hold or can the runup continue from here? Laurence Balanco: In the short term, we can see a bit more of a consolidation, but it does not take away the fact that the double bottom pattern still gives you this upside target of just over 26,300 and so there will be new highs for the Nifty. But in the US market particularly and in the local Indian market also, we have seen some rotation into lagging spaces. Last week, we highlighted the smallcap index which has started to accelerate higher and play catchup after underperforming since peaking in December. We have got a few of these catchup trades starting to develop and that should increase the participation breadth for this advance that we have seen in the Nifty. The dollar index has been quite steady under that 100 mark and has been range bound ever since. What are you making of emerging markets amid a global situation like with a tariff overhang? There are talks between the US and China. We understand the US and Mexico may be reaching a deal. Where do the emerging markets and India stand in this global backdrop? Laurence Balanco: Yes, just going back to that dollar index commentary, the break of 100 we think is meaningful, not only does it end the trading range that you had from 2022, but we think it does mark the peak to the dollar bull market that you have had from the 2011 lows. So, a major trend reversal is playing out. The breakdown from that 2022 to 2025 trading range with the break below 100 gets the dollar index down to the 89 to 90 area. Live Events You Might Also Like: Nifty to climb new high by Sept-Oct; bullish on 3 stocks now: Dharmesh Shah We think at least another 9% downside is likely in the dollar. Historically, we have seen that a weaker dollar has been positive for all the broader emerging market index. The EM versus DM ratio bottomed in December. We have not made any new relative lows. It does look like we are retracing against a trend of underperformance that we have seen over the past 15 years. We really think we are at the beginning of a re-rating in the emerging market basket. While India has not been a top performer year to date, we still think it is going to be one of the top performing or better performing emerging markets and our longer-term upside target for the Nifty still sits at over 37,000. So, the trend is there and continues to improve. That is, of course, 2030, but within the year, where do you see the Nifty range because it seems like Nifty also will try and play catch up with its global peers that are hitting fresh highs. Laurence Balanco: We would not be surprised through the summer months that we get above the 26,300, then potentially see another consolidation period and then step towards that 37,000 area. But yes, the first target we will be focusing on is at 26,300 through the summer. What do you think the texture of the Nifty is going to be? I will come back to the debate on largecaps versus what is happening in SMIDs, but purely within the Nifty because what we have seen since the start of the week is a great sectoral churn at play. The underperformers are pushing up. It is not just financials, but the most unloved sector, FMCG that is propping the index. Is the rally going to get broader with underperformers participating? Laurence Balanco: We have seen a rotation into the laggards right now. We have seen it in the US where the stocks that have performed the worst over the past 12 months have outperformed the best performing stocks over the past 12 months and that has only happened in June. We have seen it in the local market. We are starting to see it in a bit of China too. So, this is a bit of a rotation theme that we are seeing globally. While we do not think there is a change in leadership as the leadership within the Indian market will remain centred around the financials, the underperforming spaces in IT, pharma, and FMCG are likely to continue. But outside of this short-term rebound and rotation into laggards, the structural uptrend from financials is intact and into that 37,000 target that we have, financials will be a key leader. You Might Also Like: Nomura lifts Nifty target price by 1,170 points, unveils 17 top stock picks Other than financials, which sector can participate in this sector rotation? Laurence Balanco : Probably the most recent one that looks very enticing here is still the real estate space. It is not just DLF that we have seen lead, but we have started to see some of the laggards within that come through. So, I definitely highlight real estate as a leadership sector coming through. And then, more broadly the PSU. So, not just PSU banks, but we are starting to see other PSUs also participate and recover, having peaked in July last year, having been the first major sector to have peaked last year, that started to base out and break through that downtrend resistance. So, we would put the PSUs as participating and driving some leadership now.