Nifty 50 index has retreated: Buy the dip or sell the rip?

The Nifty 50 index has pulled back in the past few weeks as investors focused on the bond market and as investors started taking profits. After rising to the record high of ₹19,988 in July, the index has pulled back by 3% to ₹19,397. Despite the retreat, the blue-chip Indian index has soared by more than 15% from the lowest level in March.

Global stocks retreat

Global stocks have pulled back in the past few weeks as concerns about the bond market and China slowdown intensified. In the United States, indices like the Nasdaq 100 and S&P 500 have retreated by more than 5% from the year-to-date high.

US bond yields, which move inversely to the price, have jumped to the highest level in more than a decade. The 10-year yield jumped to 4.30% while the 30-year soared to 4.38%. This performance means that the Fed will likely continue hiking interest rates in the coming meetings.

The Nifty 50 index also pulled back also retreated because of worries about China. As I wrote here, the Chinese economy is slowing at a faster pace than expected. The economy is going through key challenges on demand, demographics, debt, and decoupling. This is notable since most Indian companies have some operations in China.

The most recent Nifty 50 news was on Jio Financial, a company owned by Reliance Industries. Jio Financial, which has a partnership with Blackrock, saw its stock plunge after going public.

Most companies in the index have pulled back in the past 30 days. Bajaj Financial, Bharat Petroleum, Asian Paints, Britannia Industries, and SBI have dropped by more than 10%. Other top laggards were Kotak Mahindra, Hero Motorcorp, and Bajaj Auto.

On the other hand, the top performers in the Nifty 50 index were Cipla, Adani Ports and Special Economic Zone, NTPC, and Adani Enterprise. All these shares have risen by more than 10%.

Nifty 50 index forecast

The daily chart shows that the Nifty 50 index has retreated in the past few weeks. It retreated from the year-to-date high of ₹19,988 to ₹19,397. On the daily chart, the index has formed a descending channel shown in green. It has remained above the 25-day and 50-day moving averages.

The Nifty 50 index remains above the important support at ₹18,896, the highest point in November last year. Therefore, I believe that this dip is worth buying for now. My target is for the index to retest the support at ₹18,900 and then retest the resistance at ₹20,000.