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Markets on a slippery note amidst high volatility, approaching bottom

ICICIdirect Research 14 Feb 2025 DISCLAIMER

Indian equity benchmarks declined 3% during the week amid heightened volatility as PM Modi’s visited US. US market outperformed by gaining 1% while Dax and Hang Seng jumped 4% and 5%, respectively

Mid & Small Cap: Past two decades data suggest, in a bull market phase, Nifty midcap and small cap have a seen maximum correction of 21% and 30%, respectively. In current scenario, with 19% and 22% correction already in place in Midcap and small cap, possibility of another 3%-5% correction cannot be ruled out

Nifty is hovering around lower band of past five weeks consolidation range 23800-22800. Going ahead, 22800 would be key level to watch, as a decisive close below 22800 would lead to extended correction towards 22200

Market breadth at bearish extreme: Historically, such an extreme pessimism led to abating downward momentum in subsequent weeks, eventually paving the way for a durable bottom.
Key monitorable:

A) The US Dollar index has cooled off and now on the verge of breakdown from recent consolidation 110-107. Further decline would provide cushion to equities

B) Ease-off in geopolitical worries would bring some stability in equity markets

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