Synopsis
A recent report indicates that the Indian market is nearing a medium-term low, suggesting that investors should consider long-term allocations. The Nifty 50 index has seen significant declines, and historical patterns point towards potential recovery opportunities. Investors are advised to remain cautious while observing market trends.Key Takeaways
- The Indian market is approaching a medium-term low.
- Investors should consider long-term allocations within the range of 21,700-22,000.
- The Nifty 50 index has declined by 16 percent since September 2024.
- Valuations across sectors are undervalued compared to historical averages.
- March historically supports market recoveries.
New Delhi, March 4 (NationPress) Although a definitive bullish signal is still absent, historical trends, technical analysis, and sectoral valuations indicate that the Indian market is approaching a medium-term low, according to a report released on Tuesday.
As such, Axis Securities recommends that investors consider allocating some long-term funds within the range of 21,700-22,000 in its 'India Equities Exclusive Report'.
"While it is challenging to pinpoint the exact peaks and troughs, wise investing revolves around seizing opportunities, particularly during times of overwhelming sentiment. This moment represents one such opportunity," the report stated.
Valuation metrics across various sectors are below both their one-year and five-year averages, suggesting the presence of potential opportunities for long-term investors.
The Nifty 50 index has witnessed a notable decline of approximately 16 percent from its peak of 26,277 in September 2024, marking the sixth-largest drop since the 2008-2009 Great Recession and the second-largest since the crash caused by Covid in March 2020.
This downtrend over the past five months, reminiscent of November 1996, has raised alarms regarding a possible bear market.
The Nifty has entered a vital support zone defined by the 100-week Moving Average Envelope (+/-3 percent), which has historically acted as a buffer against declines, except during extreme circumstances like the Covid crash. This indicates a proximity to a potentially lasting bottom.
"Historical data shows that extreme market breadth often precedes market lows, but investors should wait for signs of recovery before committing to positions," the report cautioned.
March has traditionally been a robust month for market rebounds, averaging a gain of 1.7 percent since 2009 (not accounting for the 2023 outlier drop). The Nifty has never experienced six consecutive months of falling prices, hinting at a possible recovery.
"We are witnessing phenomena that typically occur near a durable bottom—excessive pessimism, palpable fear, doubts about the very essence of equity investment even for the long term, and a shift from prior excesses to current downside sentiments, not to mention the influence of social media memes," the Axis Securities report concluded.
