The recent downturn in the Nifty 50 has raised concerns amongst market participants. Historically, the Nifty has shown a pattern of retracing to its moving averages before resuming its uptrend. However, we are currently witnessing a more pronounced decline, with the index dropping below its 100-day moving average. This has prompted questions about whether the market’s current fall is the start of a deeper trend down the hill or simply a flash in the pan before the uptrend resumes.

Now let’s try to figure it out with the help of some data. Nifty has declined for 4 weeks in a row. This is a rare occurrence. An analysis of all such past occurrences from 2010 reveals an optimistic outlook.

Historically, when the market has corrected by 5% or more over four consecutive weeks, the Nifty has shown strong forward returns over the subsequent months. The table displays the 1-month, 3-month, and 6-month forward returns along with the probability of a positive outcome

While it is natural to be concerned about the recent market decline, historical data suggests that the Nifty 50 may be poised for a recovery in the coming months. The probability of positive returns over the 1-month, 3-month, and 6-month periods following such corrections is high. As always, I encourage investors to remain vigilant and informed and be prepared for both short-term volatility and long-term opportunities.