Stock Market Indicator Signal Resurfaces: What Might Follow After a Nifty 50 Signal Since 2020
Article: Nifty's Six-Week Losing Streak: A Rare Event Amid Improving Market Conditions
The Nifty index has experienced a rare event, closing negatively for six consecutive weeks, a pattern last seen during the 2008 and 2020 crises. However, the current market conditions are vastly different, with positive macroeconomic indicators and a more moderate decline compared to past sell-offs.
In 2020, the Nifty plunged from over 12,000 to 7,511, marking a sharp and relentless downtrend. In contrast, the recent six-week losing streak in 2025 followed a much milder overall decline of about 4.97%, described as a slow bleed rather than a crash.
Historically, six-week losing streaks have often preceded significant market stress but can also lead to meaningful rebounds, albeit the magnitude of these rebounds can vary depending on the surrounding conditions. The extreme rarity of such streaks suggests that the current rebound may be more of a stabilization than a dramatic turnaround.
After this recent losing streak ended in mid-August 2025, the Nifty showed renewed optimism. The index gained about 1.10% in the week ending August 16, supported by buying from domestic institutional investors, easing inflation data, hopes of monetary easing, a better monsoon, rupee appreciation, and positive earnings reports.
By August 18, 2025, the Nifty surged nearly 400 points to reclaim the 25,000 mark. This rally was driven by positive triggers including promises of GST reforms from Prime Minister Modi, an upgrade of India's sovereign rating by S&P to BBB from BBB-, and potential foreign institutional investor short covering.
The current debate is whether the current six-week losing streak is a deep correction or a temporary market pause. From a fundamental analysis perspective, the absence of a major economic shock could suggest that the current streak is more of a technical correction rather than the start of a prolonged bear market.
Positive macroeconomic signals and sectoral buying suggest a sustained recovery phase could be underway, but technical indicators remain watchful. Investors are advised to focus on growth sectors like Auto, Healthcare, Pharma, and Tourism, with some caution on traditionally defensive sectors that have underperformed recently.
It is important to note that while six consecutive weeks of Nifty declines historically preceded strong rebounds during crisis sell-offs, the current mild decline followed by government reforms and rating upgrades suggests cautious but improving market conditions with potential for recovery, though gains may be moderate compared to past severe sell-offs.
The Nifty's 200-Week Exponential Moving Average (200WEMA) is currently 15% below the 24,400 level, but as long as the Nifty trades significantly above this level, the primary uptrend remains intact. The upcoming weeks will determine whether the market treats this streak as a pause before another uptrend or a deeper correction.
In conclusion, while the current six-week losing streak on the Nifty index may be a cause for concern, the positive macroeconomic conditions, government reforms, and rating upgrades suggest that the market is moving towards recovery, albeit the gains may be more moderate compared to past crises.
Disclaimer: The writer and his dependents do not hold the stocks discussed in this article, but clients of Jainam Broking Limited may or may not own these securities. The article is for educative purposes only and not a recommendation. The content of the article is solely the personal views of the author, and investors are advised to consult their advisors before considering any investment.
- The current six-week losing streak on the Nifty index, while concerning, might signal a technical correction rather than the start of a prolonged bear market, as suggested by the absence of a major economic shock from a fundamental analysis perspective.
- In the wake of the recent losing streak, investors are advised to focus on growth sectors like Auto, Healthcare, Pharma, and Tourism, with some caution on traditionally defensive sectors that have underperformed recently.
- Positive macroeconomic signals and sectoral buying suggest a sustained recovery phase could be underway, but technical indicators remain watchful, as the upcoming weeks will determine if the market treats this streak as a pause before another uptrend or a deeper correction.
- By following the 200-Week Exponential Moving Average (200WEMA), it is evident that the Nifty's trade above this level suggests the primary uptrend remains intact, even if the 200WEMA is currently 15% below the 24,400 level.
- The influx of positive triggers, including government reforms and rating upgrades, indicates improving market conditions with potential for moderate recovery, unlike the dramatic turnarounds seen during past severe sell-offs. Investing in Defi, stocks, or other areas of finance should be approached cautiously, as the result may vary based on the surrounding conditions and sector performance.
