Market corrections unlikely to be deep, rally could continue: Analysts
The Nifty has corrected seven times in the past one year. Except on one occasion in May, it has bounced back after falls of 6-7%, which, according to analysts, is a sign of continuity of the current bull run.
The retracement levels of 61.80% is considered as key support and resistance for indices and stocks.
Mumbai: Will the recent bull run in Indian stocks continue? If the technical trends seen in the market declines in the past year or so are to go by, a stronger rebound is in the offing. The Nifty has corrected seven times in the past one year. Except on one occasion in May, it has bounced back after falls of 6-7%, which, according to analysts, is a sign of continuity of the current bull run.
“Since June 2020, it’s evident that corrections are limited to 7% with price retracement succeeding the rallies. This has been seen near the Fibonacci ratio 61.80% on five out of seven occasions,” Sandeep Porwal - techincal & derivative analyst, Ashika Stock Broking. “This time also the Nifty is exhibiting the same reversal setup post the sharp correction. The confluence of 61.80% Fibonacci ratio along with breakaway gap (Feb 2, 2021) lows of 14,335 may act as key support in the short term.”
The retracement levels of 61.80% is considered as key support and resistance for indices and stocks.
In September last year and January this year, the Nifty recovered after correcting up to 7%. In October and December last year, the index fell nearly 5% before recovering.
The exception has been in the first fortnight of May last year when the Nifty corrected up to 11% before bouncing back.
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“Ideally in a long-term bull market, index corrects between 7% and 10%; while a bear market is a period of index falling, typically 20% or more,” said Ashish Chaturmohta, head – technical and derivatives, Sanctum Wealth Management. “The past trend and Friday’s recovery make strong case for making weekly SIP for next one month in quality companies.”
Currently, 40 out of NSE 500 stocks are trading 20% below their 2021 highs whereas 213 stocks have declined between 10% and 20% from current year highs. Over 120 stocks have corrected less than 5%.
