Nifty can fall another 10% by year-end to push India into bear market, warn analysts

Amid merciless selling by foreign institutional investors (FIIs), Nifty has already fallen 10% from its September 27 record high of 26,277 and now analysts are giving out targets as low as 21,300 for India's headline index. Typically, a fall of 10% is considered a correction zone and a drop of 20% from the peak would place Dalal Street officially in the bear market zone.

"I expect the Nifty to hit somewhere to about 21,300 by the end of the year and the banking index to hit somewhere close to 42,000 with an intermediate pause at about 49,000 and 47,000," said Jai Bala of Cashthechaos.com.

In the previous trading session, Nifty had breached its 200-DMA in intraday trading and hit a 5-month low near the 23,500 mark.


FIIs have pulled out a record Rs 1.2 lakh crore from Dalal Street since Nifty's September peak as weak Q2 earnings are leading to downgrades.

Laurence Balanco of CLSA believes that India's relative underperformance may continue and possibly extend through Q1 of 2025.

"It could take 6-12 months to identify any consistent pattern. Nifty appears to have downside support at 22,800. Any major substantial upside seems limited, with no major signs of a breakout at present in Nifty," he said.

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As the market is in the midst of a sustained downtrend momentum, market experts remind traders that the old saying does not try to catch a falling knife.

"You weather the storm by staying out of the market, that is how you pack the punch for your returns and the markets generate excess alpha when you are on cash. Retailers have a much bigger advantage versus the institutions. You can go to 100% cash, which the retailers hardly ever make use of. So, you should be raising as much cash as possible and you can get in and get out of the market much quicker and faster than the institutions can do. People should be making maximum use of it," Bala said.

On the last two occasions when Nifty fell 10% from all-time highs - in September 2022 and March 2023 - the index had bounced back soon.

"Nifty has been trading in rising curved channel drawn from the June 2022 lows. It is finding support around this channel and 200-DMA. The daily RSI is forming higher lows when the price has continued to hit lower lows. This is a classic sign of a slowdown in downward momentum. A technical bounce back could be due anytime soon," SAMCO Securities said.

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Axis Mutual Fund's equity fund manager Jayesh Sundar, however, says that the risk-reward is fairly balanced in the markets at this stage.

"A balanced approach, tailored to individual risk tolerance and investment goals, would be advisable. Any incremental allocation can be equally split between Fixed Income and Equities and any further fall in the markets can be utilised to increase equity allocation," he said.