Markets nearing a medium-term bottom, can allocate some long-term capital: Axis Securities

Axis Securities said the current fall from recent highs is the sixth largest drop since the 2008-09 Global Financial Crisis, and second since the Covid-induced crash of March 2020.

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26 Aug, 2025 12:21

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The market setup is showing excessive pessimism but technical indicators and valuations are pointing to a medium-term bottom, Axis Securities has said in a note, adding that clear bullish triggers are yet to emerge but investors can look to allocate some long-term money at 21,700-22,000 levels on Nifty 50.

"While most of us can’t 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," the note added.

Axis Securities said the current fall from recent highs is the sixth largest drop since the 2008-09 Global Financial Crisis, and second since the Covid-induced crash of March 2020. Already, the five-month losing streak has been the longest reported period in the past 29 years, which has taken Nifty 50 near the 100-Week Moving Average, a critical zone, the note said.

The 14-week Relative Strength Index (RSI) has reached 'oversold' zone, the Axis note said, adding that 87% of corrections that reach this range result in a market trough and subsequent rally. The Fibonacci retracement too aligns with the 21,800-22,000 range on Nifty 50 as a zone that can potentially see demand emerge. All sectoral indices are trading below the 200-Day Moving Average, indicating an oversold setup.

Another factor that may work in favour of a rebound is the seasonality seen in the month of March, which has seen strong recoveries. "Starting from the 2009 GFC lows which were a pivotal point in the global risk-assets cycle, the month of March has averaged a gain of 1.7%," said Axis Securities. Nifty 50 has never recorded six consecutive months of fall, another factor will work in favour of any potential rebound.

"Since 2001, there have been a total of 10 declines exceeding the size of the current drop (~16%)," the report said. "More importantly, June has seen two bear markets bottom out while March, April and May have halted one bear market each."

Another findings mentioned in the report said that in the year immediately following a US election, Nifty 50 has ended higher 83% of the time, having ended in the red only once in 2001.

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