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Nifty finding support at historical extremes

ICICIdirect Research 03 Apr 2026 DISCLAIMER

Global volatility dragged Nifty down 0.5% to 22,713, mirroring a broader market decline. While IT, Metals, and Defense bucked the trend with >2% gains, Pharma and Financials faced profit-booking.
The month of March witnessed highest ever outflows from Indian equities as outflows reached ~1.2Lakh crores. Elevated crude prices (~$110 )due to conflict in middle east and deprecating currency played the major role in recent outflows. The last week itself saw outflows exceeding ~28k crores in just 3 trading sessions triggering extreme volatility.
Key Highlight: Despite seven weeks of "lower high-low" formations, Thursday’s ~600-point recovery from a two-year trend line with an exhaustion gap. Further, the combination of a Divergence on the daily chart amid oversold placement of Monthly and weekly stochastic signifies tapering off of selling pressure.
What to expect: A trend reversal requires a decisive close above the previous week’s high and the short-term average (23,500). Until then, a corrective bias persists, with a key support threshold at 21,900–21,700. The Nifty's 16% correction from record highs has pushed momentum and sentiment indicators into bearish extremes. Historically, these oversold levels amid geopolitical uncertainties offer portfolio building opportunity.

Our constructive bias is based on following observations:

  1. Since 1996, four consecutive negative monthly closes that have typically triggered strong recovery in subsequent quarters.
  2. The index is nearing its 200-week EMA (21,930); historically, bull market corrections often arrest within the 15–20% range (current: 16%).
  3. Historically, median geopolitical correction to the tune of 11% offers portfolio building opportunity
  4. With a 19% correction, Bank Nifty is approaching maturity of its typical 20–22% correction off Covid.
  5. Only 15% of stocks remain above their 200-SMA while net of daily Advance-Decline approached bearish extremes. Staggered buying in such a capitulation extreme has rewarded with ~23% rally over the next 6–12 months.

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