RBI Policy to Decide: Will Nifty Bank Break Down or Bounce Back?

The Nifty Bank index has been on the back foot for over a week, extending its losing streak to eight consecutive sessions. Monday’s close at 55,360.25—down 259.10 points—brought the index alarmingly close to the psychological support of 55,000, a level that previously triggered rebounds. As markets await the RBI's monetary policy decision, all eyes are on whether the central bank’s stance can revive sentiment or deepen the selloff.

Technical View: Still in Bear Territory, Eyes on 55,000

The broader technical structure of Nifty Bank remains under pressure. The index continues to trace a lower high–lower low pattern, reinforcing a bearish outlook. Every small recovery attempt has faced aggressive selling, showing that bulls remain absent at higher levels.

Key technical highlights:

• The index is trading well below its 10- and 20-day exponential moving averages (DEMAs), now hovering near 56,000–56,300 — levels that act as strong short-term resistance.
  
  
• On the downside, the 55,100–55,000 zone remains critical. A breakdown below this could invite further downside toward 54,500–54,300.
  
  
• The Relative Strength Index (RSI) stays below 40, highlighting weak momentum and continued bearish dominance.
  
  
• Any reversal must be sharp, high-volume, and broad-based, likely driven by institutional buying, to signal a change in trend.
  
  

“Unless bulls reclaim lost ground convincingly, technical indicators suggest rallies will be met with selling pressure.”

Derivatives Snapshot: Call Writers Take Control

The F&O space reflects rising pessimism in the banking segment. Options activity confirms resistance is stiffening, and downside bets are gaining traction.

• Call writing surged at the 56,000 strike, with open interest climbing to 12.62 lakh contracts — a major hurdle for any recovery.
  
  
• Highest put OI remains at the 55,000 strike (9.04 lakh contracts), signaling immediate support.
  
  
• However, put writers are migrating to lower strikes, hinting at reduced conviction in the index holding current levels.
  
  
• The Put-Call Ratio (PCR) fell from 0.86 to 0.77, underlining a rise in bearish positions and waning upside potential.
  
  

This data reveals that traders are increasingly protecting against downside risk, and any move higher is likely to face resistance from heavy call-side supply.

Market Sentiment & Outlook: Caution Ahead of Policy Trigger

Sentiment around Nifty Bank remains clearly bearish. The lack of institutional buying, sustained short positions, and lower highs on the chart all reinforce a downward trend. With the RBI policy outcome looming, traders should brace for short-term volatility.

Unless:

• Foreign Portfolio Investors (FPIs) begin unwinding their shorts, and
  
  
• There is a decisive break above 56,000 with volume support,
  
  

…the broader setup will remain weak.

In such a context, a sell-on-rise strategy remains prudent. Sharp rebounds may present opportunities to initiate short positions, rather than early signs of a lasting recovery.

Final Thoughts

The 55,000 level is now a make-or-break zone for the Nifty Bank index. While this area has historically acted as a springboard for sharp reversals, the current trend lacks bullish conviction. With the RBI policy decision just ahead, traders should prepare for event-driven swings, but avoid pre-emptive positioning without confirmation.

Until clarity emerges and institutional flow supports a reversal, the path of least resistance remains downward.