The volatility in the markets is confounding many investors. Just as people thought fundamentals were deteriorating and getting all gloomy at the end of the week prior to last, markets delivered an astounding rebound last week. While it might have been difficult to forecast the events of last week that triggered the rally, these are times amongst many where technical analysis can provide clarity amid uncertainty.

Technical analysis is the study of historical price movement and use the same to forecast the future. It works on three major principles. One, market/price action discounts everything. Two, prices move in a specific trend. Last but not the least, history repeats itself.

Each principle can be used in its own way at the time of analysing and making forecast. In this article, we are going to see how the third principle, “History Repeats Itself”, is playing out well in the current market context in a specific index.

What does it mean?

History repeats itself means that any movement in the past is likely to happen again in the future as well. That is assume that the share price of Company A has moved up twice from ₹100 to ₹200 in the last five years. When the share price comes down to ₹100 again for the third time, any technical analyst would tend to buy that stock. This is by looking at historical movement, it will be assumed that the price will go back again to ₹200 from ₹100, for the third time as well. That is, the technical analyst would expect the same pattern of movement to repeat again.

This principle not only applies to specific price levels, as mentioned in the above example. It will also help if a specific pattern or trend is spotted from the historical price movement.

How it helps?

If you identify that a similar pattern of movement in the past is happening now, then it will help to give an early entry or exit from the market. That is, you can be ahead in the market. This is one of the major advantages. However, the challenge lies in identifying that a movement happening in the market now is similar to that of what had happened in the past. This can be achieved by looking at the maximum historical data/chart rather than looking at the short-term picture.

What’s brewing now?

Nifty Smallcap 250 index seems to be repeating the history now. The index movement from March 2023 to now is tracing the same path as was seen from March 2020 to March 2023 (please refer the chart).

So, if history has to repeat itself, then the Nifty Smallcap 250 index could now be gearing up for a fresh rally in the coming months. This leg of rally may have the potential to take the Nifty Smallcap 250 index up to 22,000, 23,000 over the next one-and-a-half years or so.

Similar pattern is also visible in Nifty 50, Nifty Midcap250 and Sensex as well. However, the Nifty Smallcap 250 index looks more convincing among the others because of another reason. The index has a strong trendline support at 14,000 and a good bounce is happening from there over the last few weeks.

What to do?

While technical analysis can help to give an early entry or exit from the market, as in any forecasting technique, it is not fool-proof. It has its blind sides and hence stop-losses are a very crucial element. Not having stop-losses is like getting onto a car which has no brakes.

Keeping this in mind: Investors who can take a little high risk can hunt for good small-cap stocks to invest now. Those who prefer some passive investments, can consider the following mutual funds.

Nippon India Nifty Smallcap 250 Index Fund, SBI Nifty Smallcap 250 Index Fund, Motilal Oswal Nifty Smallcap 250 Index Fund and ICICI Prudential Nifty Smallcap 250 Index Fund.

Strategy

The investment idea given above is purely based on charts. So, individual investors who prefer to buy small-cap stocks have to do their own due diligence. Proper stop-loss should be kept in place to minimise the loss.

Those buying mutual funds, have to look for exits in the 22,000-23,000 region. You may also have to be ready to accept the loss and come out if the Nifty Smallcap 250 index declines below 13,000.

A fall below 13,000 will prove the bullish view wrong. It will also indicate that the history is not repeating.

Published on April 11, 2026