Nifty may fall another 5-7% before it finds a floor, according to this chartist

"So once we have run through this correction, longer term uptrend should resume and then we are targeting moves closer to that 23,000 area," according to the CLSA chartist.

The Nifty 50 index corrected close to 4% from its record high when it fell to its recent swing low of 21,710 this Wednesday.

While Balanco sees a mid-to-high-single-digit drop in the Nifty, he is expecting a deeper correction in the broader markets. He called this correction in the midcap and smallcap space the first "meaningful correction" seen since September last year and he does not believe that the corrective action is over.

"We expect sort of volatility pickup and ultimately, both the mid cap index and the Nifty itself to correct back to its 200-day (Moving Average). What that would mean in relative terms is that nifty has got roughly 5% downside, but the mid cap index from current levels still has roughly 10% downside," Balanco said.

The chartist further added that he expects the largecaps to outperform during this volatile period and both the Nifty and the broader markets are likely to test their respective 200-Day Moving Average on the downside but while that happens, the longer term structure remains intact. "But definitely in the short term, expect more volatility," he said.

Among specific stocks, Reliance Industries is where Balanco is looking to add on any declines. He sees this range between ₹2,600 - ₹2,800 as an opportunity to add exposure to Reliance. "And with that limited downside, it should give you a relative outperformance," he said.

While Indian equities are in a correction phase, the US markets are making newer highs almost daily and Balanco expects these indices on Wall Street to continue doing well, as long as the US 10-year treasury yields remains below the 4.33% mark.