Bank Nifty Hits 7-Month Low; RSI at 14-Month Oversold Levels – What’s Next?

The decline has dragged the Bank Nifty to a fresh seven-month low

The Bank Nifty index has been facing significant downward pressure, breaking below the crucial psychological level of 49,000. This marks a 9 per cent decline from its swing high recorded in mid-December 2024. Out of the last six trading sessions, the index has been in the red on five occasions, including a weak performance on Friday, January 10, 2025.

The decline has dragged the Bank Nifty to a fresh seven-month low, with ICICI Bank and SBI emerging as key contributors to the downward momentum. Both banks have seen their stock prices underperform, impacting the overall index heavily.

A notable technical indicator, the 14-period daily Relative Strength Index (RSI), has entered oversold territory. The RSI, which measures the momentum of price movements, has fallen below the 30-mark for the first time in over 14 months. The last instance of the Bank Nifty’s RSI breaching this level was in October 2023.

According to J. Welles Wilder, who developed the RSI, a reading below 30 typically indicates oversold conditions, suggesting that the index's recent performance has been particularly weak.

At the time of writing, all Bank Nifty constituents were trading in negative territory, highlighting a broad-based sell-off within the banking sector.

The recent performance of the Bank Nifty underscores a challenging period for the banking sector, with the index reaching levels not seen in several months. The oversold RSI condition may be a point of interest for market observers, but the overall trend reflects cautious sentiment among participant.

Disclaimer: The article is for informational purposes only and not investment advice.