There has been widespread expectations of a correction in the Indian equities since it started scaling fresh all time peaks - first, since the end of 2023 and later since the election results of Jun’24. There is a seasonality effect too. In the last ten years (from 2014 to 2023), September has been a negative month six times (a negative month is when monthly close is below the monthly open). Average of six negative months is 2.5% while average of four positive months is 2.42%, with a cumulative negative of 5.32%. 

Let’s evaluate Nifty's daily candlestick chart to evaluate insights beyond seasonality. The index is trading within an upward moving trend channel, with the low of 9Sep24 finding support at the lower trend line. Trading volumes have stagnated since the last 2-3 months. A long term upward sloping trend line (grey colour), connecting the peaks of Aug’18 and Oct’21 comes around the 25000 mark. There are bearish divergences in MACD and RSI - from 1Aug24 to 2Sep24, prices have surged to higher peaks while indicators have made lower peaks. Divergences are usually trend reversal signals. 

Monthly SIP flows into mutual funds are scaling fresh peaks every month - it has touched a new all time high for the 14th consecutive month. In fact, five months of the current FY24-25 has already received 55% of the entire flows of last FY23-24. Domestic investors are gradually waking up to participate in domestic equities. 

Though seasonality and technical factors are suggesting a short term decline, broad positive fundamentals tend to indicate that corrections might not be deep and large.