A bounceback in sight for April expiry

At the futures monthly expiry on Thursday, the Nifty 50 was in the red compared with the previous expiry level for the fourth consecutive month. It’s a rare event and took place for the second time in 20 years; the first time was during July-October 2002. Historical data shows that whenever the Nifty has clocked negative returns for three or more expiries in a row, it bounces back in the following month. Traders therefore will hope for a recovery in the benchmark index at the end of April 2020.

The Nifty had dropped to a low of 7,511 on Tuesday, the March 24 before recovering to 8,641 on Thursday compared with 12,151 at the time of November 2019 expiry. The 26% fall in the March 2020 expiry from the previous expiry is the second largest since October 2008 when it had lost 34%. Globally markets have reported a recovery after the US announced a $2 trillion economic stimulus on March 24. But a word of caution -- a potential rally in April may not mean that the markets have bottomed out. As the 20 year data suggests, a sharp fall in indices as seen during the past month immediately after scaling a new peak tends to extend for a period of one year with occasional relief rallies in between.