The Nifty Next 50 index - after having seen a near 25 percent fall in 4-1/2 months - is looking ripe for a rebound based on a key ratio analysis, JM Financial's technical research has suggested.
The note by JM Financial said the ratio between Nifty Junior and Nifty 50 levels has fallen to 2.5963 as on February 17, as against a high of 3.071 seen on June 18, 2024. This underperformance of nearly 15 percent is being seen as an opportunity to go long.
"We believe this massive decline provides an opportunity to assume long positions in the index hedged against the Nifty in 2-3 tranches," said the JM Financial note. The Technical and Alternative Research note goes on to cite the period of 2019-2023 where the ratio saw strong resistance at the 2.5-2.6 level on multiple occasions, which should now act as a support.
Read More: Can Nifty 50 reclaim 26,000 by December 2025?
"We believe any further strong underperfomance in Nifty Junior can prevail only on a breakdown below 2.5 levels," said the note, underscoring what it sees as a key level from where Nifty Next 50 should attempt a rebound. "On upsides, the ratio has the potential to move back towards an all-time high level, suggesting a favourable risk-reward ratio."
The Nifty Next 50 index is down by over 13% so far this year, and has turned flat compared to a year ago. This YTD fall is the second-highest decline seen in the first quarter of any calendar year over the last 10 years. The last time this index fell with a bigger magnitude in a quarter was during the Covid-induced selloff in 2020. So far in 2025, the index has been in a downward sloping channel pattern, and is now showing signs of a bounce back, said JM Financial.
Read More: Sales growth at five-quarter low but operating profit rises fastest in three quarters
The index has a strong seasonality during the second and third quarter of a calendar year, according to the JM Financial note. In the last decade, the index has ended in the green on seven and eight occasions during Q2 and Q3 of a calendar year, respectively, delivering an average return of 7% and 5% during the two periods.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
