Not just a freaky Friday, but it has indeed been a freaky month. Spooked by the US-Iran war, rising crude oil prices and the spillover effect on the Indian economy, stock market sentiment is turned extremely risk-off.
On Friday, March 13, the flagship Nifty 50 index of the Indian stock market slumped almost 450 points, or 2%, with selling pressure exacerbated by the escalating tensions in the Middle East. The index has declined for the third day in a row and a fourth time this week, taking the cumulative weekly fall to over 1300 points. Today, Nifty touched 23,112 levels as against last week’s close of 24,450.
On a month-to-date basis, the index has corrected by over 7%, making it one of the steepest drawdowns witnessed in the recent period.
“Such a sharp fall over a short span typically reflects sustained institutional selling and distribution across sectors. At present, Nifty is trading more than 7% below its 200-day exponential moving average, which clearly indicates strong bearish sentiment and structural weakness in the medium term trend. Additionally, momentum indicators continue to remain negative, further confirming that the downside pressure is still dominant,” Sudeep Shah – Head of Technical and Derivatives Research at SBI Securities.
The RSI indicator, which measures the speed and magnitude of recent price change to evaluate overbought or oversold conditions, showed a reading of 25.70.
Does this mean that the Nifty 50 can exhibit a turnaround from these levels?
Nifty 50 in oversold zone: What does it mean for investors?
According to experts, the index can continue to remain in oversold conditions for some time. Historically, short-term pullbacks or a relief rally are seen, but it can also turn out to be a “dead-cat bounce”.
In stock market parlance, a dead cat bounce is a temporary, short-lived recovery in an asset’s prices after a significant decline, followed by a continuation of the downward trend.
Similar oversold reading occurred last year in March 2025 when the RSI showed 21.79, triggering a counter-trend pullback before bottoming out in April 2025 at 21,743, said Jatin Gedia, VP, Derivatives & Technical Research, Teji Mandi.
“Considering recent evidence, we can conclude that the Nifty is approaching the oversold zone. We expect a dead cat bounce from the gap support zone 23,207 – 22,924 formed on 15th April, 2025,” he added.
That said, counter-trend pullbacks have been shallow, lasting no more than a couple of days. “The dead cat bounce could test the 23800–23950 zone, which coincides with the zone of the 20- and 40-hour moving averages,” said Gedia.
However, as per the RSI range shift rules applicable in strong downtrends, the indicator can continue to remain in the oversold zone for an extended period. This implies that while the market is stretched on the downside, there is still room for further weakness before a sustainable reversal emerges, said experts.
More pain for Nifty 50 ahead?
Shah of SBI Securities highlighted that over the last two weeks, the Nifty 50 index has consistently formed candles with long upper shadows on the weekly chart, clearly indicating that every attempt at recovery is being met with selling pressure at higher levels.
This means that market participants are using pullback rallies as an opportunity to lighten positions rather than initiate fresh longs.
Given the current chart structure and weak momentum setup, any near-term rebound, if it occurs, is likely to attract fresh selling interest, especially near resistance zones, added Shha. “Until the index shows signs of base formation, reduction in selling pressure, and improvement in momentum indicators, rebounds are expected to remain vulnerable.”
On index levels, immediate support for the index is seen around 23,200–23,000, while any rebound could face resistance near 23,800–24,200, according to Kunal Kamble, Sr. Technical Research Analyst at Bonanza.
However, the broader structure remains weak unless the index reclaims the 24,400 zone decisively, he opined.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
