The Nifty fell 3.11% this week, marking its sharpest weekly decline in 29 weeks. On Thursday, the index closed below its 200-week moving average of 22,606.97 for the first time since March 2020. While the market looks oversold, investors now watch for a potential rebound as the index tests key support.

The Nifty extended its decline for the fourth consecutive session on Thursday, ending every trading session of the last week in the red. The index fell 3.11% over the week, marking its sharpest weekly decline in 29 weeks. It also closed lower for the eighth consecutive week, its longest losing streak in 25 years.

Nifty Breached Important Support of 200-Week MA

Thursday’s decline brought the Nifty close to its April 2 low of 22,182.55. The index also slipped below the rising trendline drawn from the major swing lows of June 2024 and April 2025, weakening the broader technical structure.

More importantly, the Nifty closed below its 200-week MA, currently placed at 22,606.97. This is the first weekly breach of this long-term average since March 2020. The 22,600 zone has therefore become an important reference point for the coming sessions.

A quick recovery above the 200-week MA would help stabilise the setup. However, if the index continues to trade below this level, the broader correction could extend further.

Oversold Conditions Raise Chances of a Rebound

Despite the weak structure, the pace of the recent decline suggests that the market has become technically stretched. On Thursday, the Nifty recovered nearly 200 points from the day’s low and retraced more than half of its intraday decline. It eventually formed a bearish-bodied candle with a long lower shadow, indicating buying interest at lower levels.

The index still closed outside the lower Bollinger Band, while the daily RSI fell to 22.86, placing it deep in oversold territory. The weekly RSI, at around 31, is also nearing the oversold zone. The MACD, however, continues to reflect strong bearish momentum.

The Nifty has also moved well below its short-term moving averages. It is currently trading around 6.07% below the 50-DMA and 3.64% below the 20-DMA. Such a wide gap usually indicates an overstretched move and increases the possibility of a short-term pullback, although it does not by itself confirm a trend reversal.

Key Levels to Watch

Thursday’s high of 22,611 is the first important resistance. A move above this level would bring the 8-EMA, currently near 22,849, into focus.

A sustained close above 22,849 could strengthen the case for a counter-trend recovery towards the 20-DMA, which is placed around 23,268.

On the downside, Thursday’s low of 22,217 remains the immediate support. A decisive break below this level could expose the April low near 22,182 and increase the risk of another leg of weakness.

RBI Policy Could Keep Volatility Elevated

The RBI Monetary Policy Committee is scheduled to meet from October 5 to October 7, with the policy decision due on October 7. Ahead of the announcement, interest-rate-sensitive sectors and the broader market may remain cautious.

The policy outcome could also lead to sharp intraday moves, particularly if the RBI’s guidance on inflation, liquidity or interest rates differs from market expectations.

For now, the broader trend remains weak, but the market is also deeply oversold. The immediate focus will be on whether the Nifty can reclaim the 22,600 to 22,850 zone or whether fresh selling pushes it below Thursday’s low.

Stock to Watch: Cupid

Cupid has broken out of a seven-week consolidation base, supported by stronger volumes over the past two weeks. The stock has also closed at a fresh lifetime high, while the Relative Strength line has moved to a new high, indicating continued outperformance against the broader market. Both the short- and long-term moving averages remain in an uptrend, supporting the positive price structure.

Momentum indicators also remain favourable. The moving average ribbon continues to trend higher, the MACD has generated a fresh bullish signal, and the RSI has re-entered the strong bullish zone.

Overall, the stock has registered a bullish breakout backed by price, volume and momentum. Going forward, sustaining above ₹314 would keep the setup positive. On the upside, the stock has the potential to test ₹338-345. A stop loss can be maintained at ₹292.