Nifty’s 8-week rout sparks relief rally hopes, but the big bottom may be far

Nifty’s longest losing streak in 25 years has pushed the market into deeply oversold territory, raising the prospect of a sharp relief rally even as broader signals remain fragile.

Only 12% of NSE 500 stocks are trading above their 20-day moving averages, while just 16% are above their 50-day averages, conditions similar to those seen near the end of the March correction. Yet medium- and long-term breadth is not as depressed, suggesting that any rebound may be a short-covering rally within a broader corrective phase rather than the start of a durable market bottom.

Edited excerpts from a chat with Anand James, Chief Market Strategist, Geojit Investments Limited:


Nifty has now entered its eighth consecutive weekly decline, the longest losing streak in 25 years. Does the market have a tendency to bounce back sharply after such consecutive declines?
History suggests that extremely prolonged weekly losing streaks have been launch pads for strong mean-reversion rallies. But, over the past 25 years, there have been only three completed instances where Nifty declined for seven weeks or more consecutively. Following these declines, the index delivered an average gain of about 14.1% in the following weeks. The current decline, which began on 16 August 2026 matches one of the longest losing streaks in the last 25 years, while the cumulative correction of 8.7% is considerably smaller than the declines witnessed in previous instances.

Nifty has breached its 200-week moving average and slipped below the 22,600 support zone. What are the next critical support levels?
We are now in the close vicinity of a horizontal support region that is formed by 21743 and 22182, the reaction lows of 2025 as well as 2026 respectively, both seen in April months. The significance of this support region is that this region was successful in arresting multi month declines that preceded in the last two occasions. We are hopeful of history repeating, raising the odds of a reversal soon. That said, the break of this region would mark the end of the rise that has been on since Covid-19 and could expose 19000 and 16700, the 38 and 50% retracements respectively, from covid low.

Read more: India could see rebound in investor interest when AI-led rally slows: S Naren

Market breadth has deteriorated sharply, with mid- and small-caps also coming under pressure. What are the advance-decline ratio, 52-week low data and breadth indicators telling you about the next phase of the correction?
The market breadth data points to an entry into an oversold scenario, with only 12% of NSE500 stocks trading above their 20-DMA and 16% above their 50-DMA, conditions seen similar to those during the March 2026 that marked the end of a vicious correction. Such depressed short-term breadth readings have historically been associated with relief rallies and short-covering rebounds. The 52-week low number also points to growing stress, with 18% of NSE500 stocks now trading near their 52-week lows, marking a sharp deterioration in market participation.

However, the picture is different from a medium- to long-term perspective. While breadth has weakened significantly, 36.4% of stocks remain above their 200-DMA and 26.2% above their 100-DMA, compared with 15.8% and 13.6%, respectively, during the March bottom. Similarly, the percentage of stocks near their 52-week lows remains below the 27.2% peak recorded in March, indicating that full-scale capitulation has not yet occurred.

Overall, the market appears deeply oversold in the short term and ripe for a technical rebound, but the longer-term breadth indicators do not yet suggest a major structural bottom. Therefore, any near-term recovery is likely to be a relief rally within a broader corrective move.

Read more: After Nifty’s longest losing streak in 25 years, what should investors do now?

How would you go about trading PB Fintech stock that’s down about 50% from peak in just a matter of a few days?
Six consecutive days of close near below the 2 standard deviation from 20 day SMA, raises the odds of a reversal move up. This is what we are preparing for. That said, we would be mindful of the ongoing downside momentum that has seen marubozus, requiring wide stop loss set ups.

How do you read the sell-off in auto stocks after the monthly sales data went below expectations?
The sell-off in auto stocks appears to have amplified an already fragile technical setup. The Nifty Auto Index has slipped towards the crucial 25,260-25,200 support zone, which coincides with the 100-week moving average and the lower boundary of a long-term ascending wedge pattern.

The weakness is broad-based, with major constituents such as M&M, Maruti Suzuki, Tata Motors and Bajaj Auto breaching key weekly moving averages or horizontal support levels. Derivative data also remains bearish, with around 80% of stock futures witnessing short positions on Friday and nearly 70% showing short exposure on a week-on-week basis, indicating that traders continue to position for further downside.

That said, the index is deeply oversold on daily charts and nearing oversold territory on the weekly timeframe, suggesting scope for a short-term relief rally towards 26,280. However, unless the index sustains above 26,280, any pullback is likely to attract fresh selling pressure, keeping the broader outlook cautious.

Give us your top trading ideas of the week.

SIGNATURE (LTP: 737)
View: Buy
Target: 770
SL: 709

Signature Global is showing early signs of a recovery after rebounding from the June swing low support zone. The recent decline appears to have attracted buyers at lower levels, helping the stock stabilize near a key demand area. Momentum indicators are also improving, with the MACD histogram printing exhaustion candles, indicating that bearish momentum is fading and the corrective phase may be nearing completion. The Point & Figure chart remains in a corrective phase but is attempting to stabilize near the 730-700 support zone. The recent formation suggests supply is gradually getting absorbed, and a move above the immediate resistance band could confirm a bullish reversal and pave the way for a recovery towards higher levels.
The sharp dip below recent support levels followed by a swift recovery also points to a possible liquidity sweep, often seen before a reversal as weak hands are shaken out. With downside pressure easing and price stabilizing near support, the risk-reward setup appears favorable. As long as 709 holds, the stock has the potential to rebound towards 770 over the next few weeks.

GRAPHITE (LTP: 786)
View: Buy
Target: 820
SL: 758

Graphite India is showing signs of a potential rebound after finding support near a key horizontal demand zone. The stock has formed an Inside Bar candle, indicating volatility contraction and the possibility of a directional move in the sessions ahead. Momentum indicators are also turning supportive, with the MACD histogram printing exhaustion candles, suggesting that recent selling pressure is gradually fading. The Point & Figure chart remains constructive, with the stock holding above its recent breakout zone and consolidating after a strong upmove. The ongoing congestion appears to be a pause within the broader uptrend rather than a reversal.

As long as 758 holds, the broader bullish structure remains intact and traders may expect an upside move towards 820 over the next few weeks.

(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here)