The effect of increasing tension in West Asia is now clearly visible on the Indian stock market. A slight uptick is definitely seen from time to time, but overall the market remains under pressure. Especially Nifty, which was near its upper level some time ago, has now come down rapidly. In such a situation, a question is arising in the minds of investors that where will the decline stop?
Recently Nifty has slipped from a high level of around 26,350 to around 23,200. Such a sharp decline has weakened the market movement. Experts believe that this may not be just a small decline, but part of a solid correction. That means the market can still go down further, this cannot be denied.
Why is the level of 21000-22000 important?
In the report of ET, market experts say that the level between 21,000 to 22,000 seems to be very important for Nifty. This is not just a guess, but a conclusion drawn on the basis of many indications. Chart patterns, past trends and valuations together are pointing towards this range.
According to technical analysis, Nifty is trading in a particular range (channel). Its lower level is formed around 21,700 to 22,000. If the market follows this pattern, it may gradually move towards this level.
Valuation still not cheap
Currently the P/E ratio of Nifty is around 20. It is neither too expensive nor so cheap that it can be called bottom. If we look at history, after a big fall the market becomes stable when the P/E reaches between 15-19. In such a situation, if Nifty comes closer to 21,000, then valuations can become more attractive.
Global reasons are increasing pressure
The tension related to Iran is not limited to news only, it is directly affecting the market. The rise in crude oil prices and continuous selling by foreign investors (FIIs) are making the Indian market weak. When uncertainty increases in the world, foreign investors withdraw money rapidly, and its effect is more visible in markets like India.
Apart from this, big trends like Artificial Intelligence (AI) are supporting the bullishness in markets like America, whereas in India, no such strong theme is visible at the moment.
Will there be further relief?
Some brokerage houses believe that the market is currently reaching an oversold situation. This means that there may be a surge in the short term. But this does not mean that the decline is over. The Volatility Index (VIX) is still high, which shows that there is fear in the market.
What should be the strategy for investors?
Experts are advising that investors should not try to catch the bottom of the market in a hurry. Instead, investing gradually and in parts may be a safer approach. If Nifty comes to the level of 21,000-22,000, then it can become a better opportunity for long term investment. Also, now it will be more important to choose the right share and not just the index. In the coming time, sectors like AI can affect the earnings and growth of companies, hence it is important to invest wisely.