Nifty nears longest losing streak in 25 years. Can bulls stop the 8th consecutive weekly selloff?

Nifty50 is one weekly close away from a milestone last seen a quarter century ago. After ending last week in the red for a seventh consecutive week, the benchmark index will record an eighth straight weekly loss if bulls fail to engineer a recovery this week. That would make it the longest losing streak since 2001, when Nifty fell for nine consecutive weeks.

Yet the current sell-off is notably less severe than previous extended declines. The Nifty50 stood at 23,140.5 at the end of the week ended September 25, with the seven-week decline amounting to 5.8%. That compares with losses of 20.5% during the seven-week losing streak that ended on September 21, 2001, 22.1% in the run ending July 4, 2008, and 33.3% during the seven-week slide ending April 3, 2020.

The index’s longest losing streak was 10 weeks in the period ended April 23, 1993, when it fell 22.9%. Nifty also declined for nine weeks in the period ended April 13, 2001, losing 27.1%.

The Nifty50 was officially launched on April 22, 1996, while calculations for earlier periods were backdated.

Before this week, the benchmark had recorded seven or more consecutive weekly losses only four times in the past 25 years—in 2020, 2008 and twice in 2001. The possibility of an eighth weekly decline has now turned the market’s routine sell-off into a record-watch event.

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Technical structure remains weak

Technical analysts said the benchmark continues to form lower tops and lower bottoms on the daily timeframe. Nifty is currently in the process of forming a new lower bottom, with no confirmation yet of a significant recovery from the lows.

“The underlying trend of the Nifty remains weak. Any bounce up to 22,900-23,000 levels could be short-lived, and that is expected to be a sell-on-rise opportunity. Further weakness below 22,550 could open the door to a decline to 22,200 levels in the near term,” Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, said.

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said momentum indicators continue to point to weakness.

“From a technical perspective, RSI remains below 40, while MACD continues to slope downward below the zero line, keeping momentum weak. ADX continues to rise, indicating that bearish trend strength remains elevated. Nifty continues to trade below its 20-day and 50-day EMAs,” Shah said.

A meaningful directional shift would require short covering along with sustained follow-up buying, he said. “Until then, the broader structure remains bearish.”

Rupak De, Senior Technical Analyst at LKP Securities, said Nifty has slipped to its 200-week moving average as the decline extended.

“The index slipped to its 200-week moving average as the decline extended. This is the first time since the Covid crash that Nifty has fallen to the 200-week moving average, which is currently placed at 22,600,” De said.

A decisive break below 22,600 could trigger a sharper correction, while holding above the level could support a recovery towards the higher end, he said.

“Therefore, 22,600 will remain a crucial support level for Nifty. On the higher end, immediate resistance is placed at 22,800,” De said.

Global macro pressures weigh

The technical weakness comes against an unfavourable global macroeconomic backdrop. Brent crude is trading above $100 a barrel, while the US 10-year Treasury yield is above 5%.

Foreign investors have withdrawn around Rs 26,000 crore from Indian markets this month, taking their total withdrawals to around Rs 2.5 lakh crore.

The prospect of tighter monetary policy adds another layer of risk for equities.

BofA Securities now expects the Reserve Bank of India to raise its policy rate by 25 basis points at the October monetary policy meeting, following almost two years of monetary accommodation. The brokerage has also doubled its forecast for the total quantum of rate hikes to 100 basis points from 50 basis points earlier.

The brokerage cited rising risks of supply-side inflation amid resurgent energy prices and the possibility of higher fuel prices. It also said robust growth could keep inflation expectations elevated, shifting the balance of risks towards inflation management rather than growth protection.

Vinod Nair, Head of Research at Geojit Investments Limited, said volatile crude prices, elevated US Treasury yields and persistent FII outflows continued to weigh on domestic equities and the rupee.

“Domestic equities continue to face correction-led headwinds amid volatile crude prices, U.S. Treasury yields hovering near two-decade highs, and persistent FII outflows exerting pressure on the rupee,” Nair said.

He also pointed to the pace of IPO fundraising as an additional liquidity drain.

“Adding to the pressure, the unprecedented pace of IPO fundraising is absorbing incremental liquidity. Investor risk appetite remains subdued against a hawkish global backdrop amid rising odds of additional rate hikes later in the year,” he said.

Nair said geopolitical tensions would continue to influence near-term sentiment, while investor focus was gradually shifting towards second-quarter earnings, with expectations already moderated compared with the first quarter.

“A meaningful de-escalation of the U.S.-Iran conflict could trigger a sharp relief rally driven by improved risk sentiment. Until then, investors are likely to remain selective, favouring fundamentals and earnings visibility over broad-based market exposure,” he said.

Nifty valuations offer a counterpoint

Not all market voices expect the correction to deepen significantly.

Siddhartha Khemka, Head of Research, Wealth Management, at Motilal Oswal Financial Services, said domestic activity was providing an offset to global weakness. He pointed to August IIP growth of 8% year-on-year, a revival in urban discretionary demand and resilient GDP growth.

“After a 6.8% correction, valuations have moved into far more reasonable territory, and the downside from current levels should be limited,” Khemka said.

Alok Agarwal, Deputy CIO at Alchemy Capital Management, said the Nifty had become relatively cheaper after a period of subdued returns and slow earnings growth.

“Nifty has become relatively cheaper, in our view. It may not feel cheap primarily due to no returns and slow earnings growth,” Agarwal said.

He said the Nifty 50 was trading at a one-year forward price-to-earnings multiple of 17.4x in September 2026, compared with 21.5x in September 2024. Over the same period, the index had corrected 11%, while earnings continued to grow, albeit at a subdued pace.

“So, the multiple did the falling. Current valuations are close to the lowest levels we have seen in the post-Covid era,” Agarwal said.

Motilal Oswal Financial Services said the ongoing market consolidation, along with continued earnings recovery from FY25 lows, had led to a sustained cooling in valuations from the highs seen in 2024.

Large- and mid-caps had seen the steepest valuation corrections of 29% and 27% from their highs, respectively, while small-caps had corrected 4% from their peak on a 12-month forward P/E basis.

The Nifty 50 was trading 16% below its LPA, while mid- and small-caps were trading 4% and 27% above their respective LPAs, the brokerage said. This compared with premiums of 20%, 50% and 47%, respectively, in September 2024.

“With valuations now significantly below their peaks, earnings growth remaining healthy, and the macro environment staying strong, we believe risk-reward has enhanced further for Indian equities,” Motilal Oswal said.

However, given the relatively higher earnings growth in the mid- and small-cap segments, market performance is likely to remain firmly bottom-up, it said.

The immediate test for the bulls is therefore clear. The Nifty must hold the 22,600 support level and attract sustained follow-up buying to prevent the current seven-week decline from becoming an eighth consecutive weekly sell-off.

If that recovery fails to materialise, the index will enter territory last seen in 2001. However, unlike several earlier extended losing streaks, the current decline remains relatively limited in magnitude.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)