Axis Securities has highlighted that historically, March has been a strong month for market recoveries, with an average gain of 1.7 per cent since 2009 (excluding 2023). The report pointed out that the Nifty has never recorded six consecutive months of decline, suggesting a potential rebound may be on the horizon.
The Indian stock market has been facing pressure for the past five months, with the Nifty 50 index experiencing a sharp decline of nearly 16 per cent from its record peak of 26,277 in September 2024. This marks the sixth-largest drop since the 2008-09 Great Recession and the second-biggest correction since the Covid-led market crash of March 2020. The report mentioned that such prolonged downtrends have been rare in Nifty’s history.
According to the report, the last time the index saw a similar five-month losing streak was in 1996, when it dropped by around 26 per cent over five months, followed by an additional 6.6% decline in December before hitting its lowest point. However, a sharp recovery followed, with the market surging about 16 per cent from its low point in December 1996 and forming a “piercing line” candlestick pattern, leading to an impressive eight-month rally of 67 per cent until August 1997.
Akshay Chinchalkar, Head of Research and Content at Axis Securities, stated that the current market environment shows signs of excessive pessimism and fear, often precursors to durable bottoms. While a clear bullish trigger has yet to emerge, historical patterns, technical indicators, and sectoral valuations suggest that the market is nearing a medium-term bottom, advising investors to allocate some long-term money between 21700 – 22000.
The report also noted that extreme breadth readings, where a large number of stocks are oversold, often occur before a market bottom is formed. However, for a sustained recovery, a strong reversal signal is necessary.
The report suggests that if the Nifty follows a pattern similar to 1996, investors could see a recovery in March, though the journey might be volatile. In March 1997, for example, the index dropped 17 per cent from its high to its low before stabilizing and continuing its uptrend.
With past trends and technical indicators in focus, market participants will be closely watching to see if March once again proves to be a turning point for Indian equities.
