Experts are divided on whether the market is oversold.
Ajit Mishra, SVP of Research at Religare Broking, believes the market is oversold. However, it is not able to rebound due to rotational correction in key sectors.
"Markets are certainly oversold, but the rotational correction in key sectors limits the rebound and lowers the index with every passing week. Going ahead, a decisive break below 22,500 in Nifty could extend the decline toward 22,000. To reverse this trend, the index must reclaim and sustain above 23,000," said Mishra.
According to Devarsh Vakil, Head of Prime Research at HDFC Securities, markets may soon experience some respite.
Vakil underscored that the signs of improvement in macroeconomic parameters suggest that the current softer patch in earnings growth may soon ease. Moreover, the worst of the price deterioration appears to be behind.
"We now enter a period characterised by sectoral rotation alongside time-based correction and consolidation in select equities. These stocks will likely begin their recovery as earnings growth materialises, providing the fundamental catalyst needed for a rally in prices," said Vakil.
"This transitional phase should offer tactical opportunities as capital shifts between sectors while the broader market establishes a more sustainable foundation," Vakil said.
However, some experts believe the market is still not oversold, as despite the recent correction, many stocks are still at premium valuations.
"If we ask if it is an oversold market, I would argue it is not. The bull run we saw in the last five years has led to really stretched valuations for many companies. Despite the recent correction, many stocks remain overvalued when you compare their valuations to their prices," said Abhishek Jain, Head of Research at Arihant Capital Markets.
"Data shows that about 60 per cent of Nifty500 companies are still trading above their five-year PE. That's why one has to be very careful when picking stocks," said Jain.
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