Nifty's Critical Support At 24,000, Relative Performance With EMs Crucial, Says CLSA
As long as the Nifty maintains its position above the support, CLSA believes, there's a strong case for upside momentum.
The Nifty 50 is currently positioned near a critical support zone, specifically within the 24,000-24,043 range, according to CLSA'S technical analyst Laurence Balanco.
This level is a crucial technical anchor, defined by the 200-day moving average and the upper boundary of the double-bottom pattern that formed between February and April, he says.
As long as the Nifty maintains its position above this support, the brokerage believes, there's a strong case for upside momentum. The next target is a measured move from the February-April pattern, projected at 26,333.
India Versus Emerging Markets—And China
While the Indian market attempts to stabilise around its 200DMA, CLSA points out its relative underperformance compared to the broader emerging markets and China. The analysis of the India ETF against the EM ETF reveals that the INDA/EEM ratio has shifted into a higher trading range since the post-COVID rerating.
"Looking at the India ETF (INDA) relative to the EM ETF (EEM US), the pre-Covid era (2015-2020) saw a wide trading range of roughly 30%. After India's significant post-Covid rerating from 2020 to 2022, the INDA/EEM ratio has shifted into a higher trading range above the prior 2015-2020 range," according to the note.
The current range, which began in 2022, appears to be similarly wide, encompassing the 2023 relative lows along with highs from 2022, 2023 and 2024.
Further, India’s performance relative to China suggests that more downside is plausible, the brokerage said.
The India ETF (INDA US) to China ETF (MCHI US) ratio has decisively broken down from a double-top pattern established in 2024. Based on technical projections, this ratio has a remaining downside potential of 8-13%, according to the analyst. This aligns with key support levels seen in the 2022 and 2023 relative lows.
The brokerage highlights that India’s relative performance is a factor to watch closely, as external influences like China's recovery and broader EM dynamics will impact capital flows.
