The Indian stock market has experienced significant volatility over the past three months. The benchmark indices, Sensex and Nifty 50, underwent a broad-based correction during October and November, driven by several factors. These include heavy selling by foreign institutional investors (FIIs), subdued corporate earnings for the second quarter of FY25, and an increase in the US dollar and Treasury yields.

Additionally, expectations of an economic recovery in China have encouraged foreign investors to redirect their funds toward more attractively valued markets, moving away from relatively expensive Indian equities.

The Nifty 50, which had reached a record high of 26,277.35 on September 27, 2024, has since declined by over 7% from that level. However, global markets have shown renewed optimism following the US election results, with attention now shifting to the Republican President-elect Donald Trump, who is set to assume office in January 2025.

Nifty Performance Post-US Elections

Historical data indicates that the Nifty 50 tends to perform well in the year immediately following a US election. A report by Axis Securities reveals that, on average, the index has delivered a mean return of 21.7% and a median return of 25.7% during such periods.

Notably, the Nifty 50 has recorded gains in five out of six instances, reflecting an 83.3% success rate. The sole exception occurred in 2001, when the index faced a decline amid the aftermath of the dotcom bubble burst and the 9/11 terrorist attacks.

This historical trend suggests a favorable outlook for Indian equities as markets gear up for the next phase of global developments.

Nifty Performance in Odd-Numbered Years

The year 2025, ending in an odd number, offers an intriguing perspective for analyzing market trends. Historical data spanning a 25-year period since 1998 indicates that in odd-numbered years, the Nifty 50 has delivered an average return of 22.9% and a median return of 23.8%, according to a brokerage report.

This analysis provides valuable insight into potential market performance in 2025, highlighting patterns of “typical” behavior. Out of the 13 odd-numbered years analyzed, the Nifty 50 ended the year with gains on 10 occasions and registered losses in just three, resulting in a robust 77% win rate.

This trend underscores the likelihood of favorable returns in the upcoming year, barring unforeseen disruptions, and serves as a useful benchmark for investors formulating strategies for 2025.

“Looking at each of these metrics separately from a seasonality lens shows that Nifty bulls are expected to have the upper hand. A key assumption underlies this view – that Donald Trump’s policies will not lead to a bump in the road for US stocks, whose repercussions will undoubtedly have a trickle-down effect on global equities,” Axis Securities said.

Nifty 50 Outlook

The up-turn of Nifty 50 from the level around 23,200 has been encouraging, particularly given the fact that the break below the 200-day average did not see any downside follow-through.

“That could be explained by two things – one, a cluster of support around this level and two, a time window that portended a potential turn. This has now occurred, and what is even more encouraging is that the advance has activated a bullish head-and-shoulders formation whose larger objective – on a break of 24,800 – sits near 25,500. Should the market get there, that would represent a near 10% rebound from the November 21 trough, which would be enough to fan further optimism,” Axis Securities said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.