Nifty below 200-DMA for 95 days, longest stretch since 2016; time to buy largecaps?
Nifty has been oscillating in the 1,500-point range (24,600-23100) over the past three months. The index is forming a base above its former gap-area created on June 15 that may make structure healthy for the next leg of up move.
- Jul 23, 2026,
- Updated Jul 23, 2026 11:55 AM IST
NSE benchmark Nifty, which represents largecap stocks, on Thursday traded below its 200-day moving average (DMA) for 95 days, which is the longest stretch for the 50-pack index since 2016. The NSE barometer traded below its 200-DMA for 70 days in 2024, for 91 days in Covid-19 selloff in 2020 and 159 days in 2016, data compiled by Bloomberg Intelligence suggests, making investors wonder whether a trend reversal is on the cards.
This is at a time small and midcap stocks have outperformed largecap stocks by 18 percentage points since March, placing the move at nearly two standard deviations, hinting at an impending reversal.
The 200-DMA is a widely-tracked technical indicator that reflects an index's average closing price over the past 200 trading sessions. An index breaching its 200-DMA or staying above it is considered positive and vice-versa. Nifty is trading below its 200-DMA since February 26, 2026, Bloomberg data compiled by Business Today showed. Its 200-DMA stood at 24,803 on Thursday. For Nifty Midcap 100 index, the 200-DMA stood at 62,558.
"Structurally, over past three months, Nifty has been oscillating in 1,500 points range (24,600-23100). Meanwhile, at a current scenario index has seen forming base above its former gap-area created on 15th June 2026 that would make market structure healthy for the next leg of up move," ICICI Securities said on Thursday.
In technical analysis, the two standard deviation is considered an extreme performance gap. In the largecap-midcap context, it has historically preceded periods of catch-up by large-cap stocks, Bloomberg Intelligence suggested, noting that a rotation into large-caps could be supported by financials, which have lagged the MSCI World Financials Index by 70 percentage points (ppts) in the past three years.
In a note, Prateek Nigudkar Senior Fund Manager at Shriram Mutual Fund said equity returns from here on will be driven primarily by earnings growth. While the hit from the energy shock now looks smaller than previously feared, there is limited room for further re-rating of earnings multiples, he said.
"Large-caps are more reasonably valued and remain our preferred avenue for adding allocation," he said adding that "we will be watching management commentary closely through the earnings season to assess the damage to earnings from the conflict and the path forward."
The consensus estimates for Nifty50 and Nifty Midcap50 suggests the Street expects a reversal of trend on the cards. For the Nifty, the consensus target of 28,686 suggests a potential upside of 19.6 per cent over the next 12 months. This is nearly double the 10 per cent upside the Street expects for the Nifty Midcap index, with a consensus target of 68,492.
Vinod Nair, Head of Research at Geojit Investments noted that despite geopolitical challenges, midcaps have performed well so far in anticipation of strong corporate earnings, supported by demand-led business updates.
"While this segment’s elevated valuations compared to large caps warrant caution, underlying business conditions are expected to remain healthy at least through H1FY27," he said.
Nair, however, said sustaining the momentum by midcap companies will require the ongoing spike in input costs to normalise as demand growth may tend to become flattish in H2FY27," he said.
NSE benchmark Nifty, which represents largecap stocks, on Thursday traded below its 200-day moving average (DMA) for 95 days, which is the longest stretch for the 50-pack index since 2016. The NSE barometer traded below its 200-DMA for 70 days in 2024, for 91 days in Covid-19 selloff in 2020 and 159 days in 2016, data compiled by Bloomberg Intelligence suggests, making investors wonder whether a trend reversal is on the cards.
This is at a time small and midcap stocks have outperformed largecap stocks by 18 percentage points since March, placing the move at nearly two standard deviations, hinting at an impending reversal.
The 200-DMA is a widely-tracked technical indicator that reflects an index's average closing price over the past 200 trading sessions. An index breaching its 200-DMA or staying above it is considered positive and vice-versa. Nifty is trading below its 200-DMA since February 26, 2026, Bloomberg data compiled by Business Today showed. Its 200-DMA stood at 24,803 on Thursday. For Nifty Midcap 100 index, the 200-DMA stood at 62,558.
"Structurally, over past three months, Nifty has been oscillating in 1,500 points range (24,600-23100). Meanwhile, at a current scenario index has seen forming base above its former gap-area created on 15th June 2026 that would make market structure healthy for the next leg of up move," ICICI Securities said on Thursday.
In technical analysis, the two standard deviation is considered an extreme performance gap. In the largecap-midcap context, it has historically preceded periods of catch-up by large-cap stocks, Bloomberg Intelligence suggested, noting that a rotation into large-caps could be supported by financials, which have lagged the MSCI World Financials Index by 70 percentage points (ppts) in the past three years.
In a note, Prateek Nigudkar Senior Fund Manager at Shriram Mutual Fund said equity returns from here on will be driven primarily by earnings growth. While the hit from the energy shock now looks smaller than previously feared, there is limited room for further re-rating of earnings multiples, he said.
"Large-caps are more reasonably valued and remain our preferred avenue for adding allocation," he said adding that "we will be watching management commentary closely through the earnings season to assess the damage to earnings from the conflict and the path forward."
The consensus estimates for Nifty50 and Nifty Midcap50 suggests the Street expects a reversal of trend on the cards. For the Nifty, the consensus target of 28,686 suggests a potential upside of 19.6 per cent over the next 12 months. This is nearly double the 10 per cent upside the Street expects for the Nifty Midcap index, with a consensus target of 68,492.
Vinod Nair, Head of Research at Geojit Investments noted that despite geopolitical challenges, midcaps have performed well so far in anticipation of strong corporate earnings, supported by demand-led business updates.
"While this segment’s elevated valuations compared to large caps warrant caution, underlying business conditions are expected to remain healthy at least through H1FY27," he said.
Nair, however, said sustaining the momentum by midcap companies will require the ongoing spike in input costs to normalise as demand growth may tend to become flattish in H2FY27," he said.