Nifty Financial Services Could See ‘Healthy Correction’ After 22% Rally: SEBI RA Rajneesh Sharma

The analyst cites historical movements in technical charts, including MACD, as indicators of a near-term correction

The Nifty Financial Services Index appears to be entering a phase of consolidation or a healthy correction after rallying over 22%, noted Rajneesh Sharma, a SEBI-registered analyst.  

The index is approaching a key resistance zone and showing signs of momentum fatigue, Sharma said.

After rallying 22.7% for several months from a recent swing low, the Nifty Financial Services Index is nearing the upper boundary of a long-established ascending channel. The trendline has historically acted as a reversal point, often leading to short-term pullbacks, the analyst said.

One of the most crucial signals is coming from the Relative Strength Index (RSI), which currently stands at 68.46, just shy of the overbought zone of 70, the analyst observed.

More importantly, a bearish divergence is emerging, as the index continues to make higher highs while the RSI forms lower highs. This suggests that buying momentum is weakening, despite rising prices, which often precedes a correction.

Sharma said that a pullback at this stage would not only be natural but also healthy. The index has stayed well above its midline support zone for several weeks without any meaningful retracement. A pullback toward the 25,121 level or slightly lower could reset overbought conditions and offer fresh buying opportunities for the longer term.

While the long-term outlook remains structurally bullish, the short-term setup indicates caution, the analyst stated. A correction looks increasingly likely and could provide a more favorable entry point once the market stabilizes.

Year-to-date (YTD), the index has gained 15.4%

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