Rohit Srivastava of Indiacharts.com believes that the Nifty Bank has another 2,000 points worth of downside left before it stabilises. He made these remarks on CNBC-TV18 on Friday, October 25.

The Nifty Bank has shed 750 points in Friday’s trading session and just managed to close above the mark of 50,500. The Relative Strength Index (RSI) on the charts has now fallen to 39, which is nearing “oversold” levels. An RSI reading below 30 indicates that the stock is “oversold.”

Srivastava said that usually in a free fall, oversold readings don’t necessarily work. He expects the Nifty Bank to stabilise at levels of 48,500 in this leg of the fall, which implies a potential downside of another 2,000 points from the levels at which the index is at currently.

On the Nifty, where the index is down for the fourth straight week, Srivastava sees the first support at 23,700, followed by 23,200, which is close to the 200-DMA. CLSA chartist Laurence Balanco, earlier in the week, had also projected the Nifty to test levels of its 200-DMA in the next 20 trading sessions.

The risk-reward on a short trade currently is better on the Nifty versus the Nifty Bank, Srivastava said, adding that it is not advisable to play any counter-trend bounces or to “catch a falling knife.”

The Nifty Midcap index has entered ‘correction’ territory, having declined more than 10% from its September 24 peak.

The Nifty has corrected over 2,200 points from its peak made on September 27, while the Nifty Bank has declined 4,000 points.

Speaking of the US markets, Srivastava said that the short-term momentum indicators are also indicating a ‘sell’ signal for the indices on Wall Street, and that the US markets also are likely to have topped out.

All three benchmark indices on Wall Street are currently trading at or near their all-time high levels.