Nifty's Historical Pattern: Early April Bottoming, but Will Ongoing Global Tensions Disrupt the Trend?

Nifty Outlook: Will the Index Hold Above April 2025 Low?

The Nifty has long been known to bottom out in late March or early April, based on data from the last two decades. However, with the ongoing war, it remains to be seen if this trend will hold true. According to Akshay Chinchalkar, Managing Partner and Head of Market Strategy at The Wealth Company, the Nifty is currently in oversold territory but not yet in a capitulation or panic territory.

The index has been trending downwards, with a high likelihood of testing the April 2025 low, unless it receives a bullish candlestick with immediate follow-through. The Nifty 50 has approached its trendline support, which was drawn from the June 2024 lows. A bullish price reaction in the area of Monday's lows would indicate that the trendline is technically valid.

Key Levels to Watch

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The short-term momentum (14-day RSI) is experiencing double-positive divergence, indicating that the downtrend is mature. The weekly reading has not been this oversold since the Covid-crash lows, providing further evidence of the downtrend's extension. The 40-month moving average was tested with Monday's drop, and since the 2009 lows, all declines to this average have found support.

The readings have not reached "capitulation" territory, but are oversold. The answer to whether the Nifty is in oversold territory is yes, but whether it is in capitulation or "panic" territory is no.

India VIX and Historical Trends

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The India VIX was up for the fourth straight week, a streak that has historically been followed by positive Nifty returns one month later, with nearly 70% of instances showing gains. The Nifty itself was down for five straight weeks, a streak that has historically led to bullish behavior, with two-thirds of instances followed by positive returns one month later.

Bank Nifty and FII Positioning

The Bank Nifty has broken below the 100-week moving average, which has offered good support in the last decade. The market is now focused on the 200-week average, around 48,300 currently, and the April lows at 47,700. Foreigners have withdrawn money for 20 straight sessions, showing in the rupee hitting fresh record lows every day.

Midcap and Smallcap Indices

Smallcaps are outperforming the Nifty, with the ratio taking support from the area of the March 2024 and the March 2025 bottoms. Midcaps are doing even better relative to the Nifty, with the ratio consolidating inside a "horizontal rectangle" since June last year. This means that any rebound in sentiment may see quality smallcap and midcap stocks rebound faster.