After weeks of sharp declines, experts suggest the Indian market may be nearing a bottom, with technical indicators pointing to a possible rebound amid signs of broader small-cap recovery and oversold conditions.
Indian equities closed lower on Tuesday, but ICICIdirect said the sell-off may be nearing exhaustion after the Nifty’s latest decline broke a 13-session slide pattern that had not been seen in years. The brokerage argued that the index remains in a zone where technical rebounds often emerge, pointing to stretched downside momentum and a market that has already absorbed a sharp correction.
According to ICICIdirect, the Nifty is trading well below its 200-day exponential moving average, a level many traders use as a long-term trend marker. The firm said the weekly stochastic oscillator has fallen to 17, deep in oversold territory, which can signal that selling pressure is becoming overextended. It added that the index has spent the past five months moving within the wide range established in March, a form of volatility compression that often precedes a directional move.
The brokerage also pointed to the scale of the recent decline, saying the market has already retraced about 1,500 points in roughly five weeks, close to the size of the April-to-June fall. That, it said, strengthens the case that the current corrective phase is in its final stretch. As long as the Nifty holds the 23,200 level marked by Friday’s panic low, ICICIdirect sees room for a technical rebound towards 24,000. A decisive close below that support, it warned, could open the way to 22,700, a level it said lines up with an 80 per cent retracement of the April-to-August rally.
Broader market action offered a more constructive backdrop. The Nifty Midcap and Smallcap indices retested a 20-month consolidation breakout, while ICICIdirect said the ratio of Smallcap to Nifty is breaking out of an 18-year downtrend. That, it argued, suggests small caps may be at the start of a longer secular advance. The firm also noted that crude oil’s recent 10 per cent jump has brought prices back towards a six-month falling trend line near $106, and said any failure to build on last week’s highs near $110 could help support a pullback in the Nifty.
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