Nifty is currently in its fifth consecutive month of negative closing. So, is it time to quit markets? This is the kind of question we get regularly on our emails, across multiple forums. Newer investors are very anxious about what to do, especially in a scenario like this.

Where is the market headed?

Market Overview

Nifty is absolutely flat today. Nifty has been sort of hovering around the 22,500 mark for quite some time now. Every time Nifty approaches a particular support, it does look like maybe this is the time for a probable bounce. But, as you can clearly see, this 40 DMA mark has been a very crucial resistance. Every time there is an attempt to get past this mark, immediately there is a sharp sell-off, pushing the markets further below. Exactly the same thing happened around the start of February, and we are once again at a lower low that has been established.

Higher lows and lower highs have clearly been established since the start of October. So, five consecutive months of negative performance on Nifty50 is not great news at all. There have been talks about things cooling down as far as geopolitics is concerned, which could result in oil prices coming down or the DXY (dollar index) easing off a little bit. The 10-year US yields are also coming down gradually, but none of this seems to be impacting the markets, especially the Indian markets, in any positive manner.

As of now, banking stocks are the only hope for the markets. Let’s see how this progresses going forward.

Nifty Next 50

Nifty Junior is down by 0.92%, and the severity of the fall continues. Nifty Junior has taken a big hit yet again, marking three consecutive negative days. This index, despite being a large-cap index, is behaving very similarly to the mid-cap and small-cap indexes.

Nifty Mid and Small Cap

The Mid-Cap 150 is down by 1.26%, back at this important support around 18,150. Let’s see how that moves going forward. The Small-Cap 250 index is also very similar to mid-caps, nearing the support of 14,000. So, maybe if we cannot hold on to the support, we might be looking at further correction. But Small-Cap is very close to a 25% drawdown, which is a very healthy correction that one should expect once in a while. There’s absolutely nothing to fear.

Nifty Bank Overview

Bank Nifty, on the other hand, is a positive takeaway for today, up by 0.28% and is very close to its 48 DMA as well. So if there is a break on this side, maybe we can hope for Bank Nifty to challenge this level at 50,700.

GOLD

Gold, after this spectacular rally, is pausing for a while. As we discussed before, there is a pole and flag formation that we can see. Currently, gold seems to be taking a rest around the 8,545 mark.

Advanced Declined Ratio Trends

The market breadth is completely in control of the bears. Nifty 500 shows 385 declines versus 113 advances. In fact, Nifty Bank is the only index which is more distributed 50/50 towards advances and declines. The rest of the indices are completely beaten down, with the bears taking full control and charge

Nifty Heatmap

Today’s heat maps, as discussed before, show banking stocks doing really well, neutralizing the negative impact created by some of the auto and FMCG stocks. If you see here, there’s good performance from Bajaj Finance, Bajaj Finserv, and Sriram Finance, up by 5.6%. This is trying to neutralize the negative impact of stocks like Ultratech Cement, Maruti, Bajaj Auto, Tata Motors, and Esha Motor, all losing quite hard. Trent also is a big loser today, down by 3.12%.

The Nifty Next 50 index, except for three green bars, is looking completely negative. Bajaj Holdings, Cholamandalam Finance, Zomato are returning positive figures. You also see Naukri and some stocks here and there showing some positive gains, but apart from that, it is a completely red, done-and-dusted heat map that I don’t want to spend more time on.

Sectoral Overview

Sectoral trends show that Capital Markets is the worst-performing sector, taking a bigger hit. We will take a look at the chart later. However, the Financial Services index is doing really well today, clocking gains. On a monthly basis, the Financial Services index has performed well, clocking about 4%. In fact, it is the best performer across the last month. A lot of banking stocks are doing really well, completely holding Nifty from falling further. On a yearly basis, the same Financial Services index is up about 13%. The top performers of the month are exactly the top performers of today as well—private banks, banking services sector, and metals. All banking stocks are completely ruling the charts as far as relative performance is concerned, although I can’t call this strong performance.

Sectors of the Day

Nifty Capital Market Index

The Capital Market index is at a loss of -3.16%, trying to retest this support at 3223 levels. BSE, IEX, KFIN Technologies, CDSL, Motilal Oswal—are all losing quite a bit, between 3 and 6%. The rest of the losers are visible below.

Story of the Day : Never-ending correction, is it time to quit the markets?

We’ve been hit by five consecutive red bars on a monthly timeframe. So, let’s take Sensex for this analysis. Sensex has been making consecutive lower highs and lower lows, and we are currently at 74,611. It does look like we are going to come back and retest the general election results day low below 71,000, but again, that’s just speculation. We don’t want to get into that. The point is that you should be prepared for such phases as well, especially if you started investing in this phase.

After the market saw a remarkable rally post-COVID, going from around 25,000 to 59,000, there was a correction for almost a year and a half, followed by a breakout in 2023. Once again, we are seeing a great rally. After this rally, we are now seeing some sort of a pause in the market. Rally followed by pause, rally followed by pause—that’s the structure of markets. Please understand this very clearly, and even if we enter a correction or consolidation phase for the next year or couple of years, there’s no problem with that.

Just take a look at the chart I’m going to show you for context. We are currently on a nine-year positive streak for Sensex, from 2016 onwards until 2024-2025, when this red candle just started. It’s just been a couple of months, and we are seeing a negative bar. But please don’t be surprised if we see a positive bar towards the end of this year. We saw what happened during COVID—a massive scare that didn’t last too long, and then the market rocketed. So, these small phases, even if they last a couple of years, don’t mean that the bull market is dead, and they are part of the overall process.

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