On 1st January 2025, Anil, a Sonipat (Haryana)-based 32-year-old investor, observed the Relative Strength Index (RSI) of Cipla Ltd. increasing from 46.13 to 58.1, reflecting mounting momentum. When he saw this indication, he invested ₹1 lakh in Cipla. His investment climbed to ₹1.25 lakhs in April 2025, a three-month return of 25%. This shows how knowledge of RSI can influence investors to make better decisions.

What is RSI & Why to Invest in RSI Stocks?

Relative Strength Index (RSI) is a technical indicator that measures the speed and change of price movement. It ranges from 0 to 100 and identifies overbought or oversold levels of a stock.

RSI > 70: Indicates that a stock can be overbought.
RSI < 30: This shows that a stock can be oversold.
RSI crossing 50: Indicates increasing momentum and likely price action higher.

Purchasing stocks with increasing RSI values can assist investors in benefiting from creating uptrends.

Why to Invest in RSI Stocks?

Identifying Upward Momentum: Increasing RSI typically indicates a stock picking up momentum, possibly predicting an uptrend.

For example, on October 18, 2024, the RSI of Cipla Ltd. increased from 46.13 to 58.1, indicating increasing momentum.

Identifying Potential Breakouts: These RSI-crossing-over-the-50-level levels stocks can be used to signal breakouts. Nine of NSE's large-cap stocks on February 1, 2025, indicated a favourable trend in their RSI, like Godrej Consumer Products and ITC, showing an improving momentum.

Aiding Technical Analysis: RSI is normally plotted with other technical indicators to validate trends. For instance, on March 7, 2025, Axis Bank's daily RSI was rising and led to a trendline breakout, validating the opinion of the stock.

Watching Overbought Levels: High RSI levels can also indicate overbought levels and encourage investors to be cautious. For instance, on March 19, 2025, the RSI of Tata Steel was 77.95, indicating possible overbought levels.

Key Factors Affecting Low RSI Stocks

Factor	Impact on Stocks with Low RSI (Relative Strength Index)
Oversold Technical Indicator	An RSI below 30 usually suggests a stock is oversold and may bounce back.
Market Sentiment	Weak sentiment often pulls the RSI down. Sharp negative news accelerates RSI dips.
Support & Resistance Levels	If the stock is near a strong support zone, a reversal from a low RSI is more likely.
Volume Trends	Rising volumes with low RSI may indicate institutional buying and price recovery.
Sector Performance	Stocks in weak sectors tend to stay in oversold zones longer.
Earnings Misses	A bad earnings report can drop RSI quickly; recovery depends on the future outlook.
News & Announcements	Negative news can push the RSI below 30, but a positive update (like a new order win) may trigger sharp rebounds.
Macroeconomic Events	Rate hikes, inflation data, or geopolitical events impact RSI-based trades.

Explanation:

Low RSI stocks are popular for short-term trading and bounce-back strategies. Stocks like Tata Motors, Yes Bank, or Zomato often show RSI-based entry opportunities. Low RSI doesn’t always mean "cheap" – investors must check volume, fundamentals, and support zones before entering.

Stocks with Low RSI (Potentially Oversold)

Stock Name	Market Cap (₹ Cr)	P/E Ratio	Dividend Yield (%)	1-Year Return (%)
Vedanta Ltd	1,69,000	10.85	10.70	-23.70
Indian Oil Corporation Ltd	2,00,000	14.35	9.01	-33.21
GAIL (India) Ltd	1,27,000	10.20	3.64	-37.75
Coal India Ltd	2,41,000	6.83	6.35	-120.80
Hindustan Zinc Ltd	₹1,98,000	19.50	8.08	-227.80

NOTE: The following data has been procured from the official website of Google Finance.

Factors to Consider Before Investing in RSI Stocks in India

Investing in RSI-based stocks, especially those with low RSI values, can seem like a smart way to catch a stock at a low price before it rises again. But, like any strategy, it's important to understand the full picture.

Here are the most important factors to think about before investing in low RSI stocks in India:

1. Understanding RSI (Relative Strength Index)

RSI is a technical indicator that tells us whether a stock is overbought or oversold. The number ranges from 0 to 100.

An RSI below 30 often suggests that the stock might be oversold, meaning it could be undervalued or have dropped too fast.
On the other hand, an RSI above 70 suggests it may be overbought.

Example:

If Company A has an RSI of 25, many traders may think it’s time to buy, expecting a rebound. But that alone isn’t enough to decide.

Just because a stock has a low RSI doesn’t guarantee a price bounce. It could be low for a good reason, like bad financials or poor company performance.

2. Fundamental Analysis is Still Key

Before acting on RSI signals, you should also check the company’s fundamentals. This includes looking at:

Revenue and profit trends
Debt levels
Market share
Business model strength

Example:

In February 2024, Neha Kapoor, a retail investor from Pune, noticed that the RSI of TechNova Ltd. had dropped to 28, suggesting it was oversold. Assuming it was a good buying opportunity, she invested ₹1,00,000 at ₹200 per share. However, within weeks, the stock plunged further to ₹150, eroding ₹25,000 of her investment.

She later discovered that the company had posted a ₹300 crore quarterly loss, lost a major government contract, and was sitting on ₹2,000 crore in debt. This highlighted that relying solely on RSI without checking fundamentals can lead to costly mistakes.

3. Market Sentiment and Trends

RSI only tells part of the story. You should also consider what's happening in the overall market or the sector the company belongs to.

Example:

Let’s say a leading pharma stock like Cipla shows a Relative Strength Index (RSI) of 28, typically a sign that the stock is oversold and might rebound. But at the same time, the entire healthcare sector is facing pressure due to a government move to cap prices on 50+ essential medicines.

As a result, even though Cipla looks technically attractive, its stock stays flat at around ₹920 for two months, and investors see no real gains.

Now add a macro layer: a general election is coming up, inflation is trending at 6.2%, and crude oil prices have jumped to $95/barrel. All this spooks the market, and pharma stocks collectively drop by 5–8%, despite technical indicators flashing “buy.”

4. Volume Analysis for Extra Clarity

Volume shows how many people are buying or selling the stock. If a stock has a low RSI and high trading volume on green days, it could mean that a reversal is happening.

Example:

If Stock X has an RSI of 29 and suddenly starts trading in high volumes with the price going up slightly, it may signal that large investors are entering, expecting a bounce.

If the volume is low, the stock may not move much, even if the RSI is low. Volume helps confirm RSI signals.

5. Risk Management Strategies

Because RSI is more of a short-term indicator, it can be misleading at times. That’s why it’s important to have:

Stop-loss orders to limit your losses
Diversification so that you’re not dependent on just one or two stocks
A mix of technical and fundamental strategies

Example:

If you buy a low RSI stock and it falls another 10%, your stop-loss will sell it automatically, saving you from a bigger loss.

Low RSI strategies work best when paired with discipline and planning, not just gut feeling.

Challenges & Risks in RSI Stocks

Even though RSI can help in spotting undervalued stocks, there are still plenty of risks involved. Here's a table that breaks down these risks and how they might impact your investment:

Risk Factor	Impact on Stocks
False Signals	A stock with an RSI below 30 may look like a good buy, but it can keep falling if the company is actually in long-term trouble. You might enter too early.
Market Volatility	Sudden news (like budget announcements or global events) can cause sharp price swings, making RSI levels unreliable in fast-moving markets.
Overreliance on Technical Tools	RSI should not be the only reason to invest. Ignoring balance sheets or industry trends may lead to investing in fundamentally weak stocks.
Short-Term Focus	RSI usually helps traders look at short-term gains. Long-term investors need to consider more stable, broader trends beyond RSI values.
Liquidity Issues	Low RSI stocks sometimes have low trading volume, meaning fewer buyers or sellers. This can lead to higher price fluctuations and slippage.

Future of RSI Stocks in India

Increased Interest in Technical Analysis: As more investors in India embrace technical analysis, RSI stocks are gaining attention.

RSI, or Relative Strength Index, is a key momentum indicator that helps traders identify potentially oversold or overbought conditions. The future of RSI stocks is linked to the growing popularity of technical trading strategies among retail investors and institutional traders in India.

Market Volatility and RSI Usage: In a volatile market, RSI stocks offer investors an opportunity to identify possible reversals. When a stock’s RSI falls below 30 (indicating it’s oversold), it may present a buying opportunity.

On the flip side, an RSI above 70 suggests the stock may be overbought. As market conditions change rapidly, traders use RSI as a tool to capture short-term profit opportunities.

Rise of Algorithmic and Quantitative Trading: Algorithmic trading strategies are becoming more prevalent in India. These algorithms often use indicators like RSI to make quick trading decisions.

As the reliance on technology grows, RSI-based trading strategies are likely to become a more common approach, offering new opportunities for growth in the RSI stocks sector.

Increased Retail Participation in Stock Markets: As more retail investors enter the Indian stock markets, especially post-pandemic, technical analysis tools like RSI are being adopted by individual traders.

This shift in investor behaviour increases the relevance of RSI stocks and creates new avenues for investors to explore short-term and long-term trading strategies.

Regulatory Improvements: The Securities and Exchange Board of India (SEBI) is focusing on ensuring market integrity and transparency, which is expected to improve investor confidence.

With better market conditions, RSI stocks could become an attractive option for investors who seek to capitalise on short-term price fluctuations while ensuring more stability in the broader market.

Who Should Invest in RSI Stocks?

Short-Term Traders: RSI stocks are ideal for short-term traders looking to capitalise on quick price movements. Traders who focus on entering and exiting positions within a short period. Using RSI signals to buy when stocks are oversold and sell when overbought will find these stocks highly beneficial.
Technical Analysis Enthusiasts: Investors who are comfortable with or interested in technical analysis should consider RSI stocks. The RSI indicator provides clear signals for entry and exit points based on market momentum, making it a popular tool for technical traders.
Risk-Tolerant Investors: RSI stocks can be volatile, and trades based on RSI signals can sometimes be risky if not handled correctly. Investors willing to take on higher risk for the possibility of short-term gains may find RSI stocks to be a suitable investment vehicle.
New or Learning Investors: If you're just starting to explore stock markets and learning about technical indicators, RSI is one of the easier tools to understand. It’s straightforward and provides clear buy and sell signals, making it a great entry point for beginners.
Diversified Portfolio Seekers: Investors looking to diversify their portfolios can add RSI stocks as a part of their broader strategy. Since RSI stocks often provide short-term profit opportunities, they can complement long-term investments in other sectors, offering potential risk mitigation through diversification.

Example: Meera, a 32-year-old investor, had a ₹10 lakh portfolio split between mutual funds, blue-chip stocks, and gold. She allocated ₹1 lakh (10%) to RSI-based trades. Over 3 months, her RSI picks delivered a 12% return (₹12,000), while the rest of her portfolio grew at an average of 5%.

By blending short-term RSI strategies with long-term holdings, she not only increased overall returns but also reduced risk through diversification.

How to Invest in RSI Stocks?

Learn and Understand RSI: Before investing in RSI stocks, it’s essential to understand the RSI indicator and how it works. RSI is a momentum oscillator that ranges from 0 to 100.

A stock with an RSI above 70 is considered overbought, and one below 30 is considered oversold. Learn how to read these signals and interpret them for different market conditions.

Use a Stock Screener: You can find RSI stocks using a stock screener. Stock screeners allow you to filter stocks based on RSI values, helping you quickly find those that are oversold (RSI below 30) or overbought (RSI above 70).

This can save you time and help you focus on stocks that meet your specific criteria.

Combine RSI with Other Indicators: While RSI is a helpful tool, it should not be used in isolation. Combine RSI with other technical indicators like moving averages, support/resistance levels, and volume analysis.

This will give you a more comprehensive view of the stock’s potential movements and reduce the chances of false signals.

Keep an Eye on Market Conditions: RSI signals work best when combined with an understanding of the broader market context.

For example, if the overall market is in a strong uptrend, stocks with an RSI above 70 may still have room for growth. Conversely, in a bear market, RSI signals may not work as effectively, so it’s important to stay informed about general market conditions.

Risk Management and Exit Strategy: Since RSI stocks can be volatile, setting stop-loss orders is essential to protect your capital. Always have an exit strategy in place, whether it's based on a specific RSI level, a percentage loss, or other indicators, to limit potential losses and lock in profits.

Example: Rajiv invested ₹50,000 in an AI stock at ₹500, using an RSI of 30 as his entry point. He set a stop-loss at ₹450 to limit his downside. When the stock dipped to ₹448 due to sudden market volatility, his stop-loss triggered, and he exited with a ₹5,200 loss. Had he not set the stop-loss, the stock’s further drop to ₹380 would’ve cost him ₹12,000. This shows how a predefined exit strategy helps minimise risk.

Final Thoughts: Should You Invest in RSI Stocks?

RSI stocks may be a suitable investment for traders who want to take advantage of short-term price fluctuations. Since it can indicate possible buy and sell points based on market momentum, RSI gives technical traders useful signals. As with all technical analysis, it is not infallible and must be used in combination with other indicators and analyses.

If you are an intra-day trader, ready to take risks, and keen to use technical analysis, RSI stocks might be perfect for you. But keep in mind that it is very important to have a well-planned strategy, track the overall market, and adopt good risk management.

FAQ

Q: What is RSI, and how does it work?
A: RSI (Relative Strength Index) is a technical indicator that measures the momentum of a stock.

Q: How can I use RSI to buy stocks?
A: You can buy stocks when the RSI falls below 30, indicating that the stock may be oversold and could be due for a price reversal.

Q: Is RSI reliable for long-term investing?
A: RSI is mainly used for short-term trading as it focuses on momentum. For long-term investing, fundamental analysis and broader market trends are more suitable.

Q: How can I combine RSI with other indicators?
A: Combine RSI with indicators like moving averages, MACD, or volume analysis to confirm buy or sell signals and increase the accuracy of your trades.

Q: Is RSI a good tool for beginners?
A: Yes, RSI is relatively easy to understand and can be a useful tool for beginners interested in technical analysis and short-term trading.