Even as Indian equities remained in the green following Operation Sindoor, technical indicators and macro risks suggest the market’s recent rebound may be running out of steam, according to market veteran and proprietary trader Rohit Srivastava. He suggested that the broader setup points towards another leg down in the current bearish phase, with potential retest of recent lows and mounting global headwinds adding to uncertainty.
“The extent of the decline will depend on the degree of escalation,” said a veteran technical analyst and trader Rohit Srivastava reviewing recent chart patterns. “But if I purely go by charts, we failed to cross the 61% retracement from the April lows. That puts this bounce in corrective territory — which implies one more leg down is likely.”
The Nifty’s failure to hold above the critical Fibonacci retracement level means a retest of the April lows around 21,743 is on the table. “Even a slow grind of 100 points down every day could eventually take the market 1,000 points lower,” Srivastava warned. A moderate downside scenario sees the index holding near 22,815, but if border tensions drag on, a fall below 21,743 cannot be ruled out.
Adding to the fragility is an emerging risk from the U.S. bond market. “Yields have started rising again, and if they go back to 4.8% or higher, global markets could see renewed selling pressure,” Srivastava said. “Rising bond yields would also strengthen the dollar, potentially triggering a risk-off across emerging markets.”
In the past week, bond yields briefly eased following equity weakness, but the fall was not substantial. “The risk is that if yields resume their climb, and the Fed does not step in to support bonds, we could see a broader deflationary scare,” Srivastava explained. A potential turn in gold and the dollar could also signal stress building in the system.
Srivastava pointed to a historical framework: the steepening of the U.S. yield curve. “Each time the yield curve inverts and then steepens, it tends to precede a recession,” he noted. “Out of the last four steepenings, two — in 2000 and 2008 — led to market crashes, while in 1994 and 2020, swift action by the Fed prevented a crash.”
“We are currently at the same level of steepening — around 0.67% between the 2-year and 10-year yields,” he said. “Now the key question is: will the Fed step in with liquidity, especially by buying bonds?”
That decision could be pivotal not just for the U.S. market but also for global equity sentiment. “If the Fed does not act, the U.S. could slide into a slowdown or recession, which would eventually hurt global markets, including India.”
Still, a bullish case is a possibility. “If escalation is limited and the Fed offers support, we could bottom by the end of May and begin a recovery by June,” he said. “This would mirror the 2021-22 correction, which started in October and ended by June.”
The monthly 20-month moving average could be another key technical marker. “In both the previous correction and now, we have held above it — with the level for this month at 23,098. As long as we don’t close below it on a monthly basis, the bull market remains intact.”
For now, investors remain in wait-and-watch mode as headlines drive sentiment. “We’ve seen the kind of limited military response one would expect — a strike on terrorist sites,” Srivastava said. “But markets may keep drifting lower as long as uncertainty remains. And this can go on for days.”
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