Nifty 50 above 22,000: Why Axis Securities believes the index is close to its backside

Indian markets rebounded on Wednesday, March 5, monitoring features in Asian friends after the Nifty prolonged its longest shedding streak in three many years on Tuesday. The latest downturn was pushed by escalating world commerce tensions following U.S. President Donald Trump’s tariff rollout on key buying and selling companions.

The benchmark BSE Sensex surged over 900 factors in intraday to hit the day’s excessive of 73,934, whereas Nifty 50 rallied over 300 factors to 22,395. 

Earlier than Wednesday’s restoration, Indian markets had been within the crimson for 10 consecutive periods, fueling issues concerning the onset of a bear market. Detrimental sentiment was additional exacerbated by sustained overseas investor outflows and weak earnings development within the December quarter.

Market Overview

Regardless of right now’s rise, the Nifty 50 index has witnessed a considerable decline of roughly 15 per cent from its September 2024 peak of 26,277. Axis Securities famous that this marks the sixth-largest drop because the 2008-2009 Nice Recession and the second-largest correction because the Covid-induced market crash in March 2020. 

The index has remained in a downtrend for the previous 5 months, a sample final noticed in November 1996, elevating issues concerning the potential onset of a bear market.

Historic Development

The brokerage highlighted that the final comparable occasion occurred in 1996, when the Nifty dropped 26 per cent over a five-month-period, adopted by a further 6.6 per cent decline in December. Nevertheless, the index subsequently rebounded, closing the month 16 per cent larger than its lowest level. The restoration fashioned a month-to-month “piercing line” candlestick sample, which led to an eight-month rally of 67 per cent, reaching a brand new swing excessive in August 1997. The agency additionally famous that volatility was current throughout the restoration, as March 1997 noticed a 17 per cent drop from its excessive to low.

Why Axis Securities believes Nifty 50 is close to backside

Technical indicators counsel proximity to backside

Axis Securities identified that the Nifty has now entered a vital assist zone outlined by the 100-week Shifting Common Envelope (+/-3%), which has traditionally served as a flooring throughout corrections, barring excessive occasions just like the COVID-19 crash. Moreover, the 14-week Relative Power Index (RSI) has entered the oversold “bull market” zone (33-40), a stage that has traditionally resulted in a market trough and subsequent rally in 87 per cent of circumstances.

Moreover, the index is presently testing the decrease boundary of a parallel channel that originated from the late 2021 peak. Fibonacci retracement ranges align throughout the 21,800–22,000 vary, indicating a possible demand zone. 

Breadth indicators for the NSE500 index are at excessive lows, with solely 7.6 per cent, 6.2 per cent, and 10.1 per cent of shares buying and selling above their 50-, 100-, and 200-day transferring averages, respectively—ranges final seen throughout the COVID crash. Axis Securities famous that excessive breadth readings typically precede market bottoms, although affirmation of a restoration is required earlier than taking positions.

Excessive pessimism & worry precede sturdy bottoms

In line with Axis Securities, the market is presently characterised by extreme pessimism and worry, which regularly function precursors to a sturdy backside. Whereas a transparent bullish set off has but to emerge, historic patterns, technical indicators, and sectoral valuations counsel that the market is nearing a medium-term backside. 

The agency suggested buyers to allocate capital throughout the 21,700 – 22,000 vary, emphasising that prudent investing focuses on seizing alternatives when sentiment is extremely adverse.

March impact

Analyzing previous market cycles, Axis Securities discovered that because the 2009 International Monetary Disaster, March has averaged a 1.7 per cent achieve, bettering to three.4 per cent when excluding the intense Covid-driven drop in 2023. Traditionally, March has confirmed to be the best-performing month of the yr, rising the probability of it marking the primary optimistic month after a chronic downturn.

Inspecting previous corrections, the agency famous that there have been 10 situations since 2001 the place the Nifty dropped by greater than 16 per cent. Two of those corrections remained beneath 20 per cent, whereas three ranged between 20 and 30 per cent, and the remaining 5 exceeded 30 per cent. Notably, June has marked two bear market bottoms, whereas March, April, and Might have every arrested a bear market decline as soon as. Whereas this proof is inconclusive, Axis Securities believes that with the market at essential assist ranges, March has an inexpensive likelihood of at the very least stabilizing the continued downtrend.

Disclaimer: The views and proposals made above are these of particular person analysts or broking corporations, and never of Mint. We advise buyers to examine with licensed consultants earlier than taking any funding selections.