Error 404! 81% of Nifty 500 stocks dip below 200-DMA; market strategy here

Analysts expect the markets to remain volatile in the immediate short-term in the backdrop of tepid corporate earnings, Rupee movement and Donald Trump's tariff threats.

The consistent fall in the Indian stocks, especially the broader markets, in the last few weeks has taken 404 out of the 500 stocks, or 81 per cent, that comprise the Nifty 500 index below their respective 200-day moving average (DMA).  Technically, the 200-DMA is considered as the key indicator to determine the bullish and bearish trend. A stock or an index that is trading below the 200-DMA is considered to be in a bearish trend and vice versa.  Within the Nifty 500 pack, Honasa Consumer, Sterling and Wilson Renewable Energy, Whirlpool of India and Adani Green Energy have plunged over 52 per cent since September 27, 2024 when the markets peaked.  Chennai Petroleum, Sobha, Rajesh Exports, Thermax, HFCL, Jupiter Wagons, Rites, PVR Inox, Shipping Corporation of India, Godrej Properties, Suzlon Energy, NCC, Star Health, Shree Renuka Sugars and Jio Financial Services also lost between 30 – 50 per cent during this period.  “The December 2024 (Q3-FY25) quarter earnings were not up-to-mark. Valuations, too, were expensive; hence, we are seeing some valuation-based market correction now", said Kranthi Bathini, Director - Equity Strategy at WealthMills Securities.  Mid-and small-cap stocks are high-beta, Bathini said, and are prone to selling pressure as liquidity dries up. As a result, these shares are witnessing a steeper fall compared to others, Kranthi explained. He, however, expects earnings expansion in the March quarter.    In the backdrop of the US-triggered global tariff war, Prime Minister Narendra Modi's visit to the US, shall act as the next major trigger for the market; Kranthi added.  The NSE Nifty 50 index, too, is trading below its 200-DMA, which now stands at 24,046. As of February 11, 35 out of the Nifty 50 stocks were seen trading below the long-term moving average. Prominent among these are Reliance Industries, TCS, Tata Steel, Tata Motors, ITC, Hindustan Unilever, Larsen & Toubro and Adani Group shares. 

    Within the Nifty MidCap 150 and the Nifty SmallCap 250 indices, as many as 118 and 204 stocks, respectively, are trading below their respective 200-DMAs, ACE Equity data shows.  Market strategy & key levels  Analysts expect the markets to remain volatile in the immediate short-term in the backdrop of domestic (tepid corporate earnings, rupee movement) and global (Donald Trump’s tariff threats and their impact on financial markets) developments.    The pain, they believe, will be more pronounced for the broader markets as valuations in select stocks still seem stretched despite the recent correction.  “It is crucial to assess potential risks while staying abreast of global developments. If the Nifty continues to decline below the 23,000 mark, selling could further intensify and take the index towards 22,800 - 22,750 in the near-term. Conversely, any rebound towards 23,250 - 23,350 is likely to act as an intermediate resistance, followed by significant obstacles around 23400 (20 DEMA) and 23500,” Sameet Chavan, head research – technical and derivative at Angel One said.  Meanwhile, the selling pressure in the broader market has been so severe that almost 1 out of every 5 Nifty 500 stocks has tumbled over 30 per cent post September 27, 2024 – the day the Nifty 50 registered its summit at 26,277 levels.    In comparison, the Nifty has declined nearly 12 per cent in the same period; the Nifty MidCap 150, Nifty SmallCap 250 and the broader Nifty 500 indices have shed 15.8 per cent, 17.6 per cent and 14.5 per cent, respectively, data shows.  Sectorally, the Nifty Energy and CPSE indices have taken the worst hit, with the former down over 29 per cent, and the latter has cracked 24 per cent.