The Indian stock market has been experiencing a sharp decline for the fourth consecutive day, with significant instability observed in the small and mid-cap segments. Investors are concerned because their portfolios have not shown positive momentum over the last four days, and an atmosphere of downturn prevails in the market.
A technical expert from JM Financial warns that if the market falls below the 22000 level, the situation will worsen. He forecasts that the NSE Nifty index could experience an additional drop of 1500–1600 points over the next three months. If this forecast is confirmed, Nifty may reach the 21000 mark within the next three months.
JM Financial believes that the market is going through a period of significant disappointment, and the levels of 22,550–22,180 are critical for Nifty. If the market begins to recover, good growth in large-cap stocks is expected. However, if recovery does not occur and Nifty falls below 22,000, a further decline of 1500–1600 points within three months is possible.
JM Financial notes that in periods when the market breached the 200-week moving average (EMA), there was a sharp short-term decline, but in the long term, this created good opportunities for investors. This brokerage firm pointed out that the Nifty index faced a serious decline because only 24 percent of stocks are trading above their 50-day moving average (DMA), and only 22 percent are above the 200-DMA, putting the large-cap market under strain.
JM Financial emphasizes that the weakness is not limited to the small and mid-cap segments; a significant decline is also observed within the Nifty 50 index. Although recent growth in the 50-DMA showed initial signs of stability for large companies, JM Financial views the growing market tension across various capitalization categories as a sign of laying the foundation for broader market improvement.
According to the report, Nifty has long shown poorer performance compared to Nifty Midcap 100, and the Nifty-to-Midcap 100 ratio has been in a downtrend since 2021. This indicates that mid-caps have performed significantly better in the long run compared to large caps. It is also noted that this ratio is approaching a historical high. In JM Financial's opinion, the continuous growth of these indicators followed by reaching high levels suggests strengthening structural changes towards large-cap stocks.
Today, the BSE Sensex fell by more than 1200 points from its daily high and is trading at 72,585.92. Meanwhile, Nifty dropped by approximately 300 points and is trading below 22,400. The Nifty Bank sector also recorded a fall of over 1000 points. The largest declines were seen in the mid and small-cap segments: Nifty Midcap fell by 3.16 percent, and Nifty Smallcap fell by 3.64 percent.
