Benchmark stock indices are showing clear signs of short-term recovery, as measured by key technical indicators. However, market experts are cautioning that this rebound is not yet sufficient to confirm a sustained, long-term bullish trend. While the improving momentum suggests a recovery from oversold zones, analysts point to significant structural resistance ahead.
Short-Term Momentum Indicators Show Revival
The immediate strength of the market has been highlighted by the performance of the 50-Day Moving Average (50 DMA). This indicator tracks average prices over the past 50 trading sessions, signalling near-term trend health. According to Axis Securities data, on April 13, about 49% of the top 500 stocks traded above this crucial level.This marks a dramatic improvement from the prior reading of March 19, when only 18% of stocks were trading above the 50 DMA. Historically, a move above this level suggests improving momentum and resilience in the market structure.
Long-Term Signals Remain Under Cloud
Despite the positive short-term readings, the long-term picture, guided by the 200-DMA, remains cautious. The 200 DMA is widely considered the benchmark for long-term trends, acting as a key support in bull markets. As of April 13, nearly 67% of the top 500 stocks were trading below the 200-DMA.This contrasts with the 77% below the 200-DMA recorded on March 19. The sustained distance from this key long-term moving average indicates that major investor confidence has not decisively turned positive yet.
Expert Viewpoints on Structural Shifts
Analysts suggest that while the market has absorbed the worst of the recent volatility, the recovery is currently in its early stages. Rajesh Palviya, head of research at Axis Securities, noted that while the 50 DMA indicates short-term recovery, the long-term trend has yet to turn positive.This disparity suggests that overall investor confidence has not fully recovered. Rohit Srivastava, founder of strike.money & indiacharts.com, commented that although the worst market pressures seem to be priced in, the majority of stocks are still substantially far from their 200-DMA.
The Contrarian View and Future Outlook
The deep correction observed in single months can be viewed through a contrarian lens. On March 19, the high percentage of stocks trading below the 200 DMA was analyzed as flashing excessive pessimism.Palviya pointed out that when 77% of stocks trade below the 200 DMA, it is generally considered extremely oversold. Historically, such deep corrections have been followed by strong returns over the subsequent three, six, or twelve months. However, he cautioned that the structural improvement may take a few months. Investors are advised to monitor for new sectoral leaders emerging as the market attempts its breakout attempt.
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