DeepDive Week 10, 2025: Sharp recovery in Small/Mid Caps. Nifty takes support at 22000 level. SP500 and USD Index crack as Silicon Valley predicts higher inflation. Bitcoin makes a new low.
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Week 10: 3rd - 7th March, 2025
IMPORTANT GLOBAL CUES
The week saw reversal in Nifty from oversold levels, with sharp upside rally seen in Midcaps and Smallcaps. In our previous DeepDive Report, we forecasted the strong likelihood of this happening. While Dalal Street rejoiced some relief, things were in contrast at the US stock exchanges, as the volatility remained high in the major indices - S&P500, Nasdaq and Russel2000.
What really happened? Let’s find out.
Donald Trump’s stance to impose tariffs on Mexico, Canada, EU, China (and more) and retaliation by counterparts is costing the US markets heavily. China has accepted this Trade War, whereas Canada is planning to impose reciprocal tariffs on imports from US. Analysts predict that this turbulence will lead to inflation rising back above 5% in next 12 months, eventually delaying the Fed’s earlier plans to cut interest rates. Nobody expected this from the Trump 2.0 innings. Hence, the week was full of volatile swings, not limited to just stocks, but also seen in crypto currencies and commodities.
This volatility in the US market is likely to stick around for a while, as Trump2.0 navigates through the dual complexities - Internal (inflation, slow growth and joblessness) ; and External (trade wars). Any signs yet?
Following signs have emerged suggesting strong probability of tough time for US Economy:
(a) US 10Y Treasury Yields have corrected by 50bps, as investors run for safe shelter amidst volatility predicting slower growth and higher inflation worry ahead.
(b) S&P500 Index makes new lower-low, and now close to its 200DMA.
S&P500 Index: chart on ‘daily’ timeframe. (Source: TradingView)
(c) Bitcoin trades below the 5th November levels (Trump 2.0 start date) eroding it’s 50% upside rally after Trump won elections. Our previous DeepDive Report, shared very interesting insights - busted the stability myth of Bitcoin and correlated it’s price movements with S&P500. Encourage you to read it for better clarity.
Bitcoin Price Chart on ‘daily’ timeframe. The formation of ‘lower-lows’ and ‘lower-highs’ can be clearly seen. The price is currently trading below all its key moving averages - 21DMA (blue), 50DMA (red) and long-term 200DMA (orange). Source: TradingView
(d) US Dollar Index (DXY) cools off by 5.5% in a month. On one hand it raises concerns of imports costing higher for the American economy, while on the other hand, it is a big positive for the Indian stock market. Fall in DXY should eventually lead to INR strengthening, something that our markets need to attract Foreign Institutional liquidity inflow. Also, India being the net importer, INR appreciation will contributed to reducing total import bills. Keep an eye on DXY as any further fall will make Indian equities more attractive for long term investors.
US Dollar Index: chart on ‘daily’ timeframe. (Source: TradingView)
(e). Crude Oil prices are falling predicting weaker demand ahead.
(f). Massive Job Layoffs as more than 2.2L job cuts have happened just in 2025, highest YTD since 2009. As per DOGE (Department of Government Efficiency), the Trump2.0 has done significantly high layoffs in Govt. sector.
IMPACTS ON INDIAN STOCK MARKET
A). Nifty50 reverses from Support Zone:
Nifty50 Index: Price Chart on ‘daily’ timeframe. Nifty takes a reversal from major support zone. (Source: TradingView). Nifty50 trades below all it’s moving averages, including long-term 200DMA (orange line).
In our previous DeepDive Report, we highlighted that Nifty was trading close to it’s major support zone at 21500-22000 level. And, Nifty exactly took support from this range. It still trades below all it’s key moving averages (21DMA, 50DMA and 200DMA).
Wouldn’t it be better to compare the previous week’s technical chart of Nifty50? The chart below is exactly reproduced from our previous week’s DeepDive Report!
Nifty50 Index (previous week-9): Price Chart on daily timeframe. (Source: TradingView).
B). Market Breadth improves from ‘extremely oversold’ levels:
Market Breadth at the end of Week 10, 2025 (Source: ChartInk)
Stocks trading above 21DMA: increased from 6% to now 38% (majorly by sharp reversal in small & mid cap stocks.
Stocks trading above 50DMA: 15% stocks closed the week above their 50DMA. This number was 7% previous week.
Stocks trading above 200DMA: has increased from 12% (previous week) to now around 17%. This means, still the majority stocks trade below their long term moving average line (200DMA).
There’s another interesting data in the above image (highlighted in red boxes), suggests positive change in character of overall market. It is separately highlighted below:
Area Chart of Stocks with price change >3% : On 5th March, 1072 stocks traded with price change above 3% at the closing of the day. This was the highest number since 1st April, 2024 (almost 11 months) when 1176 stocks closed above 3% price change. Note, the number was lower on 5th June’24 (i.e. post Modi 3.0 win’s sharp recovery)
Area Chart of Stocks with price change >5% : On 5th March, 374 stocks traded with price change above 5% at the closing of the day. This was the second highest number since 1st April, 2024 (515 stocks), as on 5th June’24 post election day rally, 451 stocks closed above 5% price change.
(C). Performance of Midcap & Smallcaps:
Midcap Index gained +2.7% during the week;
SmallCap Index gained: +5.5% during the week.
Nifty Midcap100 Index: Price Chart on ‘daily’ timeframe. It is trading below it’s key moving averages- 21DMA (blue), 50DMA (red) and long-term 200DMA (orange). (Source: TradingView)
Nifty Midcap100 Index: Price Chart on ‘daily’ timeframe. It is trading below it’s key moving averages- 21DMA (blue), 50DMA (red) and long-term 200DMA (orange). (Source: TradingView)
WHAT SHOULD A TRADER DO RIGHT NOW?
“As a Trader, these global cues indicate that volatility will remain high in the US market. And, it’s overarching influence will certainly make things difficult for Indian stock market. Though the periods of high market volatility offer some of the best opportunities, they act like a double-edge swords. Therefore, it is important to remain cautious and defensive! Act only when the market turns favourable. ”
As per our Trading Rules, that are based on the experience of legendary traders, when the major indices are trading below it’s 200DMA (long terms average), it is a ‘No Trade Zone’ for traders. No sustained move is expected till then, rather it can do more damage by multiple chops. Risk Management is our priority! We had discussed about this ‘Rule’ more at length in our earlier Week-4 DeepDive post (click here to read). Again a reminder - ‘nothing great happens when indices/stocks trade below 200DMA’.
Build your Watchlist:
Stay on the sidelines, and focus on building a watchlist of stocks. How can you find that? Stock which are trading above 200DMA, preferably above 50DMA, are the ones where you should focus. When the Indices improve and resume the uptrend, these are the stocks that can likely give a solid runup.
Find leading stocks from leading sectors/themes. For clue, look for sectors trading above 200DMA, and find the top stocks from these sectors.
For instance: the HVAC theme (Heating, Ventilation and Air Conditioning) is showing great strength in the current market volatility. And there are good names showing high relative strength like - Blue Star, Amber, PGEL and KRN.
As long as Indices are trading below all it’s key MAs, it is prudent not to initiate any new trading position(s). Till then, build a WATCHLIST of potential leaders!
Corrections & Bear Phases are the best time to find ‘Next Potential Leaders’ as leading stocks show relative price strength and you can filter them through the following clues:
(i) leaders fall less than the major indices,
(ii) leaders bottom out before the major indices,
(iii) leaders show sharp recovery as major indices see buying/green days,
(iv) leaders start emerging as indices consolidate before/after reclaiming their MAs i.e. ideal buy ranges for a positional/swing trader.
If the major indices improve in coming week(s), you can likely find low risk entries in stocks from your watchlist. Always stay where strength is! Just wait for the overall environment to turn favorable, before you begin your Trading Hike!
That’s a wrap! See you in the next week’s DeepDive Report.
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