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The Nifty 50 index has fallen over 16% from its September 2024 peak of 26,277, currently trading around 22,000. Despite this downturn, Axis Securities suggests the market may be approaching a bottom, based on five key observations:
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Support at 100-Week Moving Average (WMA): Historically, the Nifty has found support near its 100-WMA during corrections. Currently, this average is around 21,900, indicating a potential support level.
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Key Fibonacci Retracement Levels: The Nifty is testing the lower boundary of a parallel channel from the late 2021 peak. Fibonacci retracement levels between 21,800 and 22,000 suggest a possible demand zone.
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Extremely Poor Market Breadth: Only 7.6% of NSE 500 stocks are above their 50-day moving average, 6.2% above the 100-day, and 10.1% above the 200-day. Such extreme breadth readings often precede market bottoms.
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Oversold Weekly Relative Strength Index (RSI): The 14-week RSI has entered the oversold “bull market” zone (33-40). Historically, 87% of corrections reaching this zone have led to market troughs.
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March Effect and Historical Patterns: March has typically been a strong month for market recoveries, averaging a 1.7% gain since 2009 (excluding 2023’s plunge). Additionally, the Nifty has never recorded six consecutive months of decline, suggesting a potential rebound.
Axis Securities concludes that current market conditions exhibit signs of excessive pessimism and fear, often precursors to durable bottoms. While awaiting a clear bullish trigger, historical patterns and technical indicators suggest the market is nearing a medium-term bottom.
