Nifty Bounces Off Key Support — Can 7-Week Losing Streak Finally End?

Nifty 200-WMA In Focus: The Nifty's recovery above its key long-term moving average on Wednesday has brought the index back into focus after it briefly slipped below the crucial technical level in the previous session.

The index retested its 200-week moving average (200-WMA) at 22,606 on Tuesday, briefly dipped below it and subsequently recovered. The 22,400-22,600 zone now remains a crucial support area for the benchmark, according to Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities.

Shah noted that the Nifty's current seven-week losing streak is rare, with only six such instances recorded since 1992. Historically, the end of such losing streaks has been followed by an average gain of around 11% in one month and 39% over 12 months. However, the historical sample is small and outcomes have varied considerably across episodes.

The 200-WMA also remains a key technical level to watch. Shah said decisive breaks below the moving average have historically preceded major corrections, with the 2008-09 financial crisis and 2020 Covid-led sell-off being notable examples. The Nifty subsequently fell around 38% and 27%, respectively, in those episodes.

At the same time, Ajit Mishra, SVP of Research at Religare Broking, said the Nifty has historically witnessed rebounds after testing its 200-week simple moving average (SMA). The index's latest test of the long-term support zone therefore raises the possibility of a near-term rebound.

However, it is too early to conclude that the current recovery marks the beginning of a trend reversal.

Shah said the broader market backdrop remains important, with elevated crude oil prices, global bond yields and foreign investor outflows continuing to weigh on sentiment.