Nifty bottom yet to come, shows this rare gap-down trend: SAMCO Securities

A note from SAMCO Securities warns that based on the study of past history of more than 1% gap-down open on the Nifty, a market bottom is yet to arrive.

The NSE Nifty 50 on Friday opened with a 45-point or 0.2 per cent gap down at 25,656 amid the ongoing US-Iran war related concerns. Prior to today, the Nifty had registered two consecutive gap-down openings of more than 1 per cent each on March 2 and March 4.  Historically, this was just the 9th such instance where the Nifty opened with a gap down of more than 1 per cent in back-to-back trading sessions since its inception; highlights a note form SAMCO Securities.  The note warns against bottom-fishing at current levels and instead advises being prepared for a further fall based on historical trend analysis for a 3-day and 5-day forward period.  Raj Gaikar, Research Analyst, SAMCO Securities, analyzed huge gap-down market openings during major geopolitical global events and their behaviour. Based on its past reactions to such events and spotting the trend, Gaikar claims that Nifty is yet to bottom out before it stabilises.  "If the market gaps down sharply for two straight sessions, it usually signals that something meaningful is wrong, either globally or economically. In such situations, expecting an immediate bounce is often wishful thinking rather than a sound strategy," cautions Gaikar.  ALSO READ | Nifty crashes 1,000 points below its 200-DMA; analysts see more downside  The SAMCO Securities note highlights that a review of historical data since the inception of Nifty 50 shows eight such instances. These events span several periods of global stress; the European debt crisis in 2011, the COVID market crash in March 2020, and the rate-hike and Russia-Ukraine related selloffs of 2022.  On 4 March 2026, markets witnessed the 9th such occurrence of this pattern. The trigger this time came from rising geopolitical tensions following US-Israel strikes on Iran, the reported killing of Supreme Leader Khamenei, and fears of disruption in the Strait of Hormuz, which has pushed crude oil prices higher.  The chart below shows forward returns over the next 3- to 5-trading sessions across the past historical events. Even after removing the extreme March 2020 COVID crash, the Nifty generally continued to drift lower or moved sideways. A quick V-shaped recovery rarely appeared in such circumstances. 

 

This behaviour is logical when viewed through the broader market structure. Back-to-back gap downs of this magnitude are rarely random. They often signal that institutional money is reducing exposure rather than rotating between sectors, suggests Gaikar.  The current environment reflects similar macro stress. Foreign Portfolio Investors (FPIs) have remained consistent sellers, India VIX has moved above 20, the Rupee is under pressure, and Brent crude is rising on supply disruption fears.  In addition, the Bank of Japan's recent rate hike is tightening global liquidity conditions. These are structural pressures that typically take time to stabilise.  ALSO READ | Markets react strongly to geopolitics but eventually move on: Jim Rogers  The analyst warns that the 2 consecutive gap downs of more than 1 per cent each are not a buying signal. They are the market's way of indicating that the ground beneath has shifted.  The key takeaway is simple: avoid panic, but also avoid aggressive bottom-fishing. History suggests that markets usually need time to absorb the shock before stabilising. Maintaining discipline, respecting stop-loss levels, and waiting for clearer signals of stability may prove far more effective than rushing to buy the first dip, the note states.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.