Are markets in oversold territory and is a trend reversal possible next week? Here's what analysts say

Stock market today news: Sensex, Nifty see profit booking in trade. 

• Sensex and Nifty drop sharply due to West Asia tensions, oil prices.
• Both indices saw their worst weekly fall since 2020 and 2022.
• Markets are oversold, but no clear reversal signals yet.

Did our AI summary help?

The benchmark equity indices Sensex and Nifty settled sharply lower on Friday amid escalating tensions in West Asia and rising crude oil prices. Weak global markets, continued foreign fund outflows and a fall in the rupee further dampened investor sentiment.

Extending losses for the third straight session, the Sensex plunged 1,579.82 points or 2 percent, to 74,454.60 during intra-day trade. It later recovered marginally but still settled 1,470.50 points or 1.93 percent lower at 74,563.92. The Nifty declined sharply, dropping 488.05 points or 2.06 percent to close at 23,151.10.

Analysts said the sharp correction has pushed the market into oversold territory, raising the possibility of a short-term pullback, though clear reversal signals are yet to emerge.

Analysts flag oversold territory for markets 

Analysts at Bajaj Broking said the steep fall has dragged key technical indicators into oversold levels.

"The sharp decline has pushed daily oscillators into oversold territory, with the 14-period RSI below 30. A short-term pullback is possible, but there are no clear reversal signals yet. The index needs to start forming higher highs and higher lows on a sustained basis and close above last week’s high of 24,303 to signal a pause or reversal in the downtrend," they said.

They added that the index trend remains weak across short- and medium-term time frames as it continues to form lower highs and lower lows.

"Key support on the downside is placed around the 22,700–22,400 zone," the brokerage said.

Pressure persists despite oversold zone

Ajit Mishra, SVP – Research at Religare Broking, said the market has struggled to hold key levels despite oversold conditions.

"Nifty has failed to defend its recent support levels despite being in an oversold zone, largely due to intense pressure in rate-sensitive sectors," he noted.

Further downside possible if pullback fails

Nagaraj Shetti of HDFC Securities said the broader trend remains sharply negative.

"The underlying trend of the market is sharply down. There is a higher possibility of Nifty showing a minor pullback from near the lows of around 22,900 by next week. If it fails to do so, then one may expect more weakness down to 22,500–22,000 levels in the near term. Immediate resistance is placed at 23,500," he said.

For the week, the Nifty dropped 5.3 percent, its biggest decline since June 2022, while the Sensex fell 5.5 percent, marking its worst weekly fall since May 2020.

All 16 major sectoral indices ended the week in the red. The broader markets also remained under pressure, with the Nifty Smallcap100 and Nifty Midcap100 indices falling 2.5 percent and 2.65 percent, respectively.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.