Panic selloff may not last long, Nifty50 to bottom out soon

The Covid-19 outbreak and its spread have increased anxiety in the global markets. On an average, developed and emerging market equities have fallen 15 per cent in just over a month. This has increased panic, measured in terms of volatility. The volatility indices have seen a sharp spike to multi-year highs in recent times. However, past data shows selling in the Indian equity market has stopped within a month or two. Out of nine panic situations seen in the last 10 years, the Nifty has bottomed out within a month or two in six instances after posting an average decline of 11-13 per cent, shows a study by ICICI Securities. In three out of nine times, the Nifty has seen bottom formation in four to five months after posting average decline of 17 per cent. Post 2015, as the markets have started trading at lower volatility levels of 10 per cent, the sharp panic levels in volatility have seen top formation near 30 per cent. Currently, volatility has seen a surge from 10 per cent to 25 per cent already. It is expected to see a cool-off from 30 per cent, which should ideally form the market bottom, according to ICICI Securities. 74468307 “Currently, the Nifty has already fallen by 10 per cent. Hence, the Nifty has important level of investment at 10,800 and worst case scenario seems to be close to 10,400,” said Pankaj Pandey, head of research, ICICI Securities.

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