Oversold stocks: 96 out of Nifty 500 shares RSI below 30; what it means?

Within the Nifty 500, 14 stocks, including AWL Agri, LTIMindtree, Wipro, CoForge and IRFC were trading with a RSI reading below 20; technically the oversold threshold for the RSI parameter is 30.

The Indian stock market has bounced back partly in trades on Thursday amid positive global cues. The pullback has come as a relief to select beaten-down shares.  On Thursday, thus far, the NSE Nifty 50 index was up - 0.55 per cent or 138 points at 24,619, while the broader Nifty 500 index gained 0.63 per cent at 22,554.  In the preceding three trading sessions, the Nifty 50 plunged over 1,000 points or 4 per cent, and the Nifty 500 tanked 1,039 points and 4.4 per cent amid the US-Israel-Iran war triggered sell-off.  The damage was far more severe in the broader mid and small-cap indices, which slumped up to 5 per cent each as investors rushed to trim exposure amid rising uncertainty. Analysts said that mid and small cap stocks were absorbing the impact of a broad-based domestic and global sell-off. READ MORE  Amid the carnage in the broader market, 1 in every 5 Nifty 500 stocks technically slipped into oversold zone, with the key momentum oscillator - the Relative Strength Index (RSI) reading falling below the 30 threshold.

What does the RSI indicator say?

The RSI indicator is a key momentum oscillator that measures the speed of change in the price movement in either direction over a specified period of time. In general, a 14-day period is considered as a standard period, with the RSI is plotted on a scale of 0 - 100.  In technical terms, a RSI reading below 30 is considered oversold, while a RSI reading above 70 is considered as overbought. For example, below is AWL Agri Business daily chart with a RSI reading of 13.9. 

 

  Oversold stocks tend to bounce back; however, analysts caution that oversold conditions do not automatically signal a reversal. Instead a RSI below 30 can reflect continued weakness in momentum, says Hitesh Tailor, technical research analyst at Choice Equity Broking.

Oversold stocks

A technical scan of Nifty 500 stocks show that 96 shares were technically trading in oversold zone, with a RSI reading below 30.  Prominent stocks among these are - ACC, Apollo Tyres, Bajaj Finserv, Eternal, HCL Technologies, HDFC Bank, InterGlobe Aviation (IndiGo), Infosys, IRCTC, ITC Hotels, JIO Financial Services, Ola Electric, RailTel, RCF, RVNL, Suzlon, Tata Elxsi, TCS and Tech Mahindra to name a few.  Within the oversold space, there are 14 stocks with a RSI reading below 20 - this includes the likes of AWL Agri Business, LTIMindtree, Wipro, IRFC and CoForge. Below is the full list. 

 

  Meanwhile, despite today's pullback - the Nifty RSI stands at 33.5, and the Nifty 50 RSI at 35.4, shows the daily chart.  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Reader’s discretion is advised.