Nifty may fall another 1,000 points in the next 20 sessions, says top CLSA chartist

Laurence Balanco, the top CLSA chartist expects the Nifty to correct further from current levels. The Nifty 50 index is currently down 7% from the record high of 26,277 it made on September 27 this year.

In an exclusive conversation with CNBC-TV18, Balanco said that he sees the Nifty heading towards levels of 23,300 in the next 20 trading sessions. This implies a downside of over 1,000 points from where the Nifty closed on Tuesday at levels of 24,470.

“We have seen downside momentum now accelerate, and the classic reversal pattern being the head and shoulders that we have seen develop August high, the October high, and then obviously this early October high forming that formation, and we were looking for a move back to the 200-day moving average, which sits around the 23,300 area. So, we see at least 5% downside. That will take the market back to long term trend support,” Balanco said.

The Nifty may test its 200-Day Moving Average levels for the third time this year, according to Balanco. Currently, the 200-DMA for the Nifty is placed at levels of 23,389, which is also the lower boundary of the uptrend channel from the lows of 2023.

“We think into November we will be hitting those downside targets. So, within the next 20 trading sessions, we think we will be down to those kinds of levels. Yes, we would look for evidence of support developing there. The last time we tested a 200 day was the intraday reaction to the general elections and the prior occasion was actually in the selloff that you saw in March-April of 2023. So, we have only been back to the 200 day over the last 18 months on two separate occasions and we think this will be the third,” the chartist added.

The sector where Balanco sees the greatest downside risk is the PSUs. Earlier this month, Balanco had also flagged downside risks in two PSU stocks, namely Coal India and Power Finance Corporation (PFC).

Tuesday’s fall took the BSE PSU index below its 200-Day Moving Average and that makes it the most vulnerable among sectors for further downside.

“We saw the BSE PSU index break below its 200-day and that is sort of leading the downside. And if you want to get more granular in this, you can look at the PSU banks versus the private banks. Now, the PSU banks have been great outperformance from the COVID lows up until the start of this year and since then it started to rollover. So essentially, now we are seeing private banks hold ground while the PSU banks underperform; if we get down into sub-sectors, but more broadly, PSU is the most vulnerable space here, having broken below its 200 day yesterday,” Balanco said.