Nifty Futures Analysis- 12Mar2020

Nifty futures are facing unprecedented speed of correction, in the face of relentless selling and lack of buying. Nifty futures have fallen from 12,150 to 9,050 (= 3100 points) in just 13 trading sessions, at the rate of 230 points per session!! This is the fastest 25% correction in the history of Indian market, and also global equity markets.

Such a sharp correction driven by fear and panic, has always given a V shape reversal rally once the fear factor goes away. There is surely going to be short term economic impact. Indian economy was somehow trying to come out of slowdown or recession and the recovery maybe be delayed by 2 quarters.

Let’s study the Nifty long term chart to find the support levels.

In the Nifty monthly chart, the long term trend line of support is now at 9000 level.
This is the support line, which has held in all corrections since 2008 till now.
There is a reasonable chance that 9000 will offer support in this correction.
Below 9000, more correction can happen till 8500 — these are untested areas in recent years, and therefore, the short term behavior of Nifty futures is difficult to predict. But these levels are good for investing, buy dangerous for traders because of highly volatility.

So what can we expect from here?
We must be sure about one thing: Indian economy has strong fundamentals. The economic recovery has got delayed by Coronavirus, but we will surely get economic recovery. The banking and GST systems are getting better, and financial credit to small enterprises is slowly improving, and rural economy is doing well because of the good rains in 2019, and crude oil prices are at very low levels. So the next leg of growth in India will be more distributed than ever before. For investors, this sharp 20% correction is a great opportunity to buy frontline Nifty stocks and Nifty index funds or diversified mutual funds.

How much can Nifty recover?
Nifty 200 day moving average is at 11,600 and Nifty may go back up to the test that level after 3 months, once Coronavirus is under control. Our Nifty Futures Trading Strategy is to buy Nifty futures above 10,000 level to benefit from this recovery to 11,600. Nifty futures will be safe above 10,000.

Nifty Futures Analysis- 25Feb2020

Nifty futures have been weak since 23 Jan 2020, and they are in the selling zone currently, and they lose ground rapidly. Gains made in 5-10 days can be lost in 1-2 days. The weekly chart shows clear weakness, with falling momentum. Nifty futures have support at 11,700 but we can’t be sure it will hold.

The 10 week SMA on the weekly chart has started curving down, and it takes several weeks of correction and consolidation to get back into an uptrend. We should not expect any support from the 50 week SMA because it has not worked in the past. So it looks like Nifty can see 300-500 points correction before a new uptrend.