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The index could be vulnerable to a bigger fall given the present market dynamics.
The ongoing stock market fall has brought the Nifty 50 index on the brink of registering its second worst-ever monthly losing streak in 30 years.
The National Stock Exchange (NSE) benchmark was launched in July 1990, and since then there have been only two instances when the Nifty 50 index has registered consecutive net loss for five or more months.
The present downtrend, which started from October 2024 till date, shall be the third such instance.
The Nifty thus far in February has declined 4 per cent, with just two trading sessions remaining this month.
Overall, in the last five months, the Nifty has so far shed 12.6 per cent from levels of 25,811 at the end of September 2024.
Amid the fall, one in every five Nifty stocks has declined more than 28 per cent thus far in the last 5 months.
Trent, Adani Enterprises, Asian Paints, BPCL, Hero MotoCorp, Bajaj Auto and Tata Motors are the major laggards, down in the range of 31 to 33 per cent.
Among the index heavyweights, Hindustan Unilever, ITC and Reliance Industries have tanked 24 per cent, 22 per cent and 18 per cent, respectively.
There are only 4 gainers thus far in this period -- Wipro, Bajaj Finance and Kotak Mahindra Bank, up 6 to 9 per cent each.
Why does the current market fall look worrisome?
One of the key reasons to be worried about the current market fall is that despite the Nifty falling nearly 13 per cent from its peak, the net loss is fairly less compared to the average losses in the past instances wherein the NSE benchmark has registered a fall in four or more consecutive months.
Data from ACE Equity shows that the Nifty has registered a monthly losing streak of four or more months on five occasions in its 30-year history, excluding the present one.
The average fall in the last five falls has been 26.8 per cent, which is more-than-double of what we have witnessed thus far in the current dip.
The Nifty registered its biggest loss, down 31.4 during its longest monthly losing streak, spanning 8 months, in the period September 1994 to April 1995, data shows.
Nifty monthly falls
That apart, in the only other five-month losing streak -- from July 1996 to November 1996 -- the Nifty tumbled by 26 per cent.
In fact, in each of the last five such instances, the minimum fall on the Nifty has been 21.8 per cent.
Thus, historically speaking the current fall seems far lesser and the index could be vulnerable to a bigger fall given the present market dynamics.
Worries galore
The recent fall has been accentuated following Donald Trump's tariff threats, and its likely impact on global economies.
Analysts believe the uncertainty surrounding this is likely to keep the market sentiment in check over the next few months.
"There is no clarity on what Donald Trump will do as regards tariffs and the geopolitical scenario. There are too many uncertainties and policy flip-flops. All this is impacting markets," said U R Bhat, co-founder & director, Alphaniti Fintech.
"Tariffs will have an impact on the US economy too, which will keep the US dollar in play. The US Fed, too, can at some point in time look at hiking rates. As a result, emerging markets will continue to feel the heat," Bhatt explained.
That apart, fears of stagflation in the US economy and persistent foreign institutional investors (FIIs) selling weighs on the investor sentiment.
FIIs have net sold stocks to the tune of Rs 1.3 trillion since the start of 2025 -- marking it as the worst sell-off in any similar comparable period.
The recent steep rise in the US 5-year breakeven inflation rate to 2.61 per cent, a two-year high coupled with the unexpected contraction seen in the S&P Global flash US Services PMI for February has increased the odds of a stagflation environment, explains Kelvin Wong, Senior Market Analyst, OANDA.
An increasingly less dovish monetary policy stance is likely to be adopted by the US Federal Reserve, in turn, tighten liquidity conditions that may trigger a medium-term negative feedback loop into the US stock market, Kelvin Wong said.
Where can the Nifty bottom?
Here's what happened in the past.
Technical charts show that barring the June 2001 to September 2001 fall, the NSE Nifty 50 index has more-or-less bottomed out after testing its super trend line support on the monthly scale.
During the July 1996 to November 1996 five-month fall the Nifty bottomed out after testing the super trend line support; whereas in the May 1998 to August 1998 four-month fall, the Nifty briefly violated (by a margin of 2.5 per cent) the key trend line support and then rebounded.
However, during the 2001 fall, the Nifty crashed below the lower-end of the Bollinger Bands on the monthly scale before bottoming out.
The Nifty slid nearly 8 per cent below the lower-end of the monthly Bollinger Bands before bottoming out.
At present, the super trend line support for the Nifty on the monthly scale stands at 21,515 -- this implies a potential downside risk of 4.6 per cent from present levels.
Below which stands the 50-MMA (Monthly Moving Average) at 19,150 levels, and the lower-end of the Bollinger Bands at 18,500 levels.
For now, from a technical analysis standpoint, Nifty's support level at 22,500 to 22,400 has become increasingly critical for the Nifty 50 index in the immediate future, said Osho Krishnan, senior analyst for technical & derivatives research at Angel One.
"This level needs to be scrutinised by traders and investors, as its ability to hold may determine whether a rebound is possible or if further declines are on the horizon.
"The presence of a bearish gap at 22,670 to 22,720 casts a shadow over any potential recovery attempts.
"This gap is expected to present a significant barrier to upward price movement, acting as a stiff resistance point that could limit Nifty's ability to regain its momentum," Krishnan added.
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Feature Presentation: Ashish Narsale/Rediff.com
