The Indian stock market closed the final session of September on a weak note, with the Nifty ending lower after giving up more than 180 points from the day's high. The decline extended the index's losing streak to three consecutive sessions.
September turned out to be a difficult month for equity investors, with the Nifty falling nearly 6%. This was the sharpest monthly decline since March 2026 and the worst September performance for the index since 2016.
However, despite the recent weakness, some technical indicators suggest that the index has entered an oversold zone, raising the possibility of a short-term recovery.
Here are three key factors that could support a bounce back.
1. Selling Pressure Continues, But Signs of Exhaustion Emerge
The index formed a small red-bodied candle with a long upper shadow in Wednesday's session. After opening lower, the Nifty recovered during the day and touched an intraday high of 22,809.35. However, the recovery was short-lived as selling emerged at higher levels, pushing the index lower towards the close.
While the index managed to form a higher high and higher low compared to the previous session, there is still no confirmation of a trend reversal. The attempted hammer pattern failed to receive confirmation, and the long upper shadow indicates that sellers remain active near higher levels.
For a reversal to gain credibility, the index needs to witness a strong positive candle supported by sustained buying interest.
2. Support of 200-Week MA and Fibonacci Number of 8-Week Decline
The ongoing decline is heading towards its eighth consecutive weekly fall. Since eight is considered a Fibonacci number, the possibility of a short-term pullback cannot be ignored, especially after a prolonged decline.
The Nifty is also approaching its 200-week moving average (WMA), which is an important long-term support zone. The immediate support area for the index remains in the range of 22,500–22,600.
From a technical standpoint, the index has moved into an oversold territory. It is currently trading around 5.36% below its 50-DMA, while the Bollinger Bands continue to remain in a steep downtrend, suggesting that the recent fall has stretched the index significantly away from its average levels.
3. Oversold Conditions Could Trigger a Short-Term Recovery
The RSI is currently placed at 25.27, indicating oversold conditions. Although RSI can remain in oversold territory during strong downtrends, such readings often suggest that the selling momentum has become stretched.
The MACD continues to remain well below the zero line, confirming the prevailing weakness. However, sharp directional moves are often followed by periods of consolidation or counter-trend rallies before the next major move develops.
The combination of oversold momentum indicators and the index approaching a key support zone increases the possibility of a technical bounce.
Levels That Traders Should Track
A recovery attempt will require the Nifty to move above the previous day's high of 22,809. A close above this level would be the first indication of improving buying interest.
The immediate resistance levels are placed at:
• 8-EMA: 22,971
• 23.6 per cent Fibonacci retracement level: 23,090
If the index manages to sustain above these resistance zones, it could witness a meaningful counter-trend rally in the short term.
However, until a decisive breakout above resistance levels, the broader trend remains weak. On the downside, the 22,500–22,600 zone will continue to act as the key support area for the index.
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