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As per the current scenario, the Indian equity market is following global developments, as there is no sign of calmness. We are witnessing sharp macro triggers and continuous news flow. After the recent correction, markets are trading near oversold territory (Nifty weekly RSI at 29 and daily RSI at 33).

This is making the market more sensitive to both positive and negative developments. As a result, we are witnessing wild intraday moves, and India VIX is trading at 24.7. Based on this, intraday volatility is around 1.5%, which, with Nifty currently near 23,000, creates an intraday range of almost 700 points.

Key factors such as Brent crude oil, which is trading around $98, and FII outflows are playing a decisive role in the sharp market correction. Elevated crude prices are keeping inflation concerns alive, while the rupee is trading near a record low at 93 per dollar, adding to macroeconomic pressures. FIIs have recorded a net outflow of ₹1.13 lakh crore, weakening the overall market position.

As we approach the close of the financial year and move into the next month, corporate earnings will also drive the markets. Investors will closely track management commentary and guidance. If earnings and outlook do not align with market expectations, we may see another round of selling pressure, especially in sectors with higher valuations.

Despite the correction, Nifty’s forward P/E of 19.70, though higher than other emerging markets, still appears attractive at current levels. This premium is justified by superior earnings growth, macroeconomic stability, and better return ratios.

Considering the collective data—technical indicators showing oversold conditions (RSI hovering around 30 levels), along with strong forward earnings and return ratios—we may see sharp rebounds or relief rallies once selling pressure fades. Extreme readings like these have often preceded such recoveries.

Additionally, India has not increased fuel prices and has managed the situation better than many other countries, which remains a supportive factor.

From a behavioural perspective, markets tend to stage strong recoveries once there is clarity in direction—whether driven by stabilization in global cues, easing crude prices, or improved earnings visibility. In past cycles, periods of heightened uncertainty and oversold conditions have often been followed by swift rebounds once either bulls or bears establish clear dominance.

In the near term, markets may remain volatile and headline-driven. A combination of global stability, supportive earnings, and easing macro pressures could trigger a recovery, while any negative surprises on these fronts may extend the corrective phase. Investors are likely to remain cautious, closely tracking both global developments and domestic earnings signals before committing to fresh directional bets.

Ankush Bajaj is a Sebi-registered research analyst. His registration number is INH000010441.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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