A Rebound Likely After 8 Consecutive Red Days: Samco Securities
Mumbai Traders seeking signs of a possible market rebound following the recent stock market selloff may find optimism in the fact that the benchmark indices have closed lower for eight consecutive trading sessions, marking the first such instance in two years and the sixth occurrence in the past 12 years. While this prolonged downtrend may raise concerns, historical data suggests that a rebound is often imminent after such a sustained decline, offering potential hope for traders and investors.
Historical Evidence of Rebounds After Prolonged Declines
According to a study conducted by Samco Securities, in four out of the five previous instances where the indices fell for at least eight consecutive days, the market experienced a rebound. This historical pattern provides a compelling basis for traders to anticipate a potential correction or recovery in the near term. The market’s ability to reverse direction after such sustained declines indicates that investors may see a positive shift in sentiment, especially given the extended period of weakness.
This phenomenon is often attributed to the fact that after a prolonged downturn, oversold conditions can lead to buying interest as investors see value in stocks that have been pushed down to attractive levels. Technical indicators such as relative strength index (RSI) and support levels may further suggest that the market is poised for a bounce, as it nears key price support zones.
What Could Trigger the Rebound?
The recent selloff has largely been driven by a combination of external factors, such as global market volatility, concerns over interest rate hikes, and geopolitical tensions. Domestically, the ongoing uncertainty surrounding inflationary pressures and corporate earnings has also contributed to the overall market weakness. However, as these factors stabilize or as the market adjusts to the current environment, there is potential for a recovery.
In particular, a positive earnings season, clarity on policy changes, or a resolution of geopolitical tensions could act as catalysts for a market rebound. Moreover, as global liquidity conditions improve and foreign institutional investors (FIIs) regain confidence, there could be an uptick in inflows, helping to push the market higher.
Investor Sentiment and Market Outlook
Although short-term volatility remains a possibility, the historical evidence suggests that after such a streak of eight consecutive negative days, traders may find an opportunity for a strategic entry point. Market participants could consider focusing on stocks with strong fundamentals and long-term growth prospects, which may offer the best risk-reward ratios during periods of market correction.
In addition, the presence of strong support levels for major indices like the Nifty50 and Sensex adds to the possibility of a technical rebound. As the market stabilizes, momentum could shift in favor of the bulls, especially if the broader economic fundamentals show signs of improvement.
