Is It Right Time To Invest In Stock Market? Axis Securities Predicts Bottom, Advises Investors To… – News18
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Axis Securities says the “market is nearing a medium-term bottom” and advised investors to allocate some long-term money between the Nifty levels of 21,700 and 22,000.
Axis Securities says while most investors cannot catch the exact top and bottom, prudent investing is about cashing in on opportunities, especially when sentiment is so one-sided.
The domestic equity market has consistently declined in the past five months, thus breaking 28-year record. The correction has led to a massive decline in portfolios of individual investors across segments. Is it the right time to invest in the market? Axis Securities said the “market is nearing a medium-term bottom” and advised investors to allocate some long-term money between the Nifty levels of 21,700 and 22,000.
“While a clear bullish trigger is yet to emerge, historical patterns, technical indicators, and sectoral valuations suggest that the market is nearing a medium-term bottom. Therefore, we would advise investors to allocate some long-term money between 21700-22000,” Axis Securities said in its latest report, titled ‘India Equities Exclusive’.
It added that while most investors cannot catch the exact top and bottom, prudent investing is about cashing in on opportunities, especially when sentiment is so one-sided.
“One such opportunity is now,” Axis stated, adding that the current market environment exhibits signs of excessive pessimism and fear.
The benchmark Nifty 50 has now lost nearly 16 per cent from its September record peak of 26,277. That’s the sixth biggest drop from an important swing high since the Great Recession lows of 2008-09, and the second largest decline since the Covid-led crash seen in March 2020. With February ending in the red, the decline is now five months old, matching a streak that was last seen in November 1996.
Is It Right Time To Invest? A Technical Analysis Of Bottom Markets
“The Nifty has entered a critical support zone defined by the 100-week Moving Average Envelope (+/-3%), which has historically contained declines except during extreme events like the Covid crash. This suggests proximity to some sort of a durable bottom,” Axis Securities said in the report.
The 14-week Relative Strength Index (RSI) has reached the oversold “bull market” zone (33-40). Historically, 87% of corrections reaching this zone have resulted in a market trough and subsequent rally, it added.
“The decline is testing the lower boundary of a parallel channel originating from the late 2021 peak. Fibonacci retracement levels align in the 21,800–22,000 range, indicating a potential demand zone,” Axis Securities said.
‘Market Breadth Comparable To COVID Crash’
The brokerage firm said breadth measures for the NSE500 index are at extreme lows, with only 7.6%, 6.2%, and 10.1% of stocks trading above their 50-, 100-, and 200-day moving averages, respectively. “These levels are comparable to those seen during the Covid crash,” it added.
Historical patterns suggest that extreme breadth readings often precede market bottoms, but investors should wait for confirmation of a recovery before taking positions, the brokerage house said.
‘Markets Never Seen 6 Months Of Decline In A Row’
The domestic stock market in February broke the record of 28 years since 1996, when it decline for five months consecutively.
On this, Axis Securities said, “March has historically been a strong month for market recoveries, with an average gain of 1.7% since 2009 (excluding the 2023 outlier plunge). The Nifty has never recorded six consecutive months of declining prices in history, suggesting a potential rebound.”
‘Odd Number Years After US Presidential Elections Post Strong Performance’
Axis Securities said years ending in odd numbers and those following U.S. presidential elections have shown strong performance, with the Nifty rising 75% and 83% of the time, respectively, and delivering median returns of 17.1% and 21%.
All sectors are in the red year-to-date, with IT (-13.9%) and media (-34.4%) performing the worst, while financial services (-2.1%) and banks (-10.2%) have been the most resilient.
Six out of 11 sectors are oversold based on their 14-day RSI, and all sectors are trading below their 200-day moving averages.
‘Valuations Are Below 1-Year, 5-Year Averages’
Valuations across sectors are below their one-year and five-year averages, indicating pockets of potential opportunities for long-term investors, the brokerage firm said.
