More than 50 percent of stocks across key indices – Nifty50, Nifty 500, MidCap, and SmallCap -- have fallen below their 200-day moving average (DMA) amid the recent correction in Indian equities, prompting analysts to advise caution.

Among these, 30 stocks are from the benchmark Nifty 50; 286 from the Nifty 500; 61 from the Nifty MidCap 100, and 58 are from the Nifty SmallCap 100 index.

Analysts note that stocks falling below the 200 DMA enter a weakened state, often leading to prolonged consolidation. However, fundamentally strong companies may find support at the 200 DMA, which can serve as a pivotal point for attracting buying interest and potentially marking a bottom, they add.

As per the latest data, around 75 stocks in the Nifty 500 index have experienced declines of over 20 percent from their peak on September 27. Additionally, 205 stocks have fallen between 10-20 percent, while 149 stocks have lost between 1-10 percent.

In the Nifty MidCap 100 Index, 16 stocks have seen a drop of over 20 percent, 47 stocks have declined between 10-20 percent, and 22 stocks have fallen between 1-10 percent. Meanwhile, in the Nifty SmallCap 100 Index, 20 stocks have fallen more than 20 percent, 31 stocks have lost between 10-20 percent, and 29 stocks have experienced declines between 1-10 percent.

Om Mehra, Technical Analyst at SAMCO Securities, advises caution when considering low-volume stocks or those down 35-40 percent from their peaks, as these typically require a lengthy recovery period and may face additional downside risk. He suggests focusing on stocks from the Nifty 500 index with higher volumes and larger market capitalizations.

Meanwhile, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, believes the current correction offers an opportunity to accumulate fundamentally strong stocks, expecting the market to bottom out around the 200 DMA.

Indian markets have witnessed a correction, with foreign investors continuing their selling spree, offloading over Rs 94,000 crore in October and Rs 25,000 crore so far in November. The market decline followed weak earnings for the September quarter and growing expectations that the Reserve Bank of India would not reduce interest rates amid persistent inflation.

Additionally, concerns over the potential escalation of the US-China trade war under the Trump administration, along with heightened geopolitical tensions, further dampened market sentiment even as many believe that India could be a beneficiary of sorts amidst the US-China tussle.

Both Sensex and Nifty have lost over 10 percent each since September while Nifty MidCap and SmallCap declined over 11 percent and 12 percent respectively.

Rupak De, Senior Technical Analyst at LKP Securities, anticipates that Nifty may test 23,200, which aligns with the 50-week exponential moving average (EMA) and the second target of the Head and Shoulders pattern in the coming sessions. In the event of a rebound, the 23,600–23,800 range could act as resistance, with the overall bearish sentiment limiting the sustainability of any upward movement, despite the RSI being in oversold territory (28.6), he says.