Nifty - Is 15,000, The New Base?

In the stock market, we often say "bhav bhagwan che", which means "price is god". But when the base is formed, we might say "ye bhav nahi aayega", which means "this price will not come again".

This sentence means that when the price of a stock has reached a low point and is starting to form a base, it is possible that the price will not go down to that level again. This is because the stock market is cyclical, and prices tend to retrace their previous movements.

However, it is important to remember that there is no guarantee that the price of a stock will not go down again. The stock market is unpredictable, and there are always risks involved in trading.

In technical analysis, chart patterns can provide valuable insights into the future direction of a financial instrument. One such pattern is the U-formation, which is characterized by a gradual decline followed by a base formation and a subsequent breakout.

The Nifty, India's benchmark stock market index, has exhibited a fascinating U-formation base on the monthly chart. This pattern has historical significance dating back to the dot-com bubble of the late 1990s.

In this blog post, we will delve into the technical aspects of the U-formation, discuss the recent correction and rally in the Nifty, and explore the potential long-term target based on the current price action.

Nifty Monthly Chart

(Click on the chart to zoom in)

The Historical Significance of U-Formation Breakouts

The U-formation breakout in 2005 after the dot-com bubble was a pivotal moment for the Nifty. The index had declined sharply from its peak of 1,800s in 2000 to a low of 1,292 in 2003. However, the subsequent rally formed a solid U-formation base without revisiting the previous lows. This demonstrated the strength and resilience of the market.

Fast forward to 2016, when the Nifty experienced another correction. The low reached 6,825, but the subsequent rally once again formed a U-formation base without revisiting the previous lows.

The Pandemic-induced Correction and Rally

The year 2020 brought unprecedented challenges to the global economy due to the COVID-19 pandemic. 

Post pandemic recovery, the Nifty experienced a sharp correction, reaching a low of 15,183 in June 2022. However, the subsequent recovery formed a distinct U-formation base, reinforcing the historical significance of this pattern.

The New Base at 15,000?

Considering the price action, it is becoming increasingly evident that the 15,000 level is emerging as the new base for the Nifty. This level has held strong during recent market fluctuations, suggesting that it has significant support from buyers. 

If this proves to be accurate, it could potentially set the stage for a significant long-term rally. If the index breaks below the 15,000 mark, the pattern and history will be negated.

Long-Term Target

While predicting exact price targets in the stock market is challenging, analyzing historical patterns can provide us with valuable insights. If the 15,000 level successfully establishes itself as the new base, it could signal a bullish trend for the Nifty. From this point, the long-term target could potentially be higher highs and a sustained upward trajectory for the index.

My target for Nifty by 2030 is 50,000.

Here are some other target prices for Nifty by 2030 that have been mentioned by experts:

Late Shri Rakesh Jhunjhunwala: 1,00,000

ICICI Direct: 50,000

Motilal Oswal: 40,000

What are your targets?

Comment below.

Disclaimer

The information provided in this article is based on historical analysis and does not constitute financial advice. Investing in the stock market carries risks, and readers should conduct their own research and seek professional advice before making any investment decisions. This is not a recommendation and just an interpretation of chart patterns.