The relentless selling in the last week has plunged several sectors in the bear territory, with Nifty consumer durables, realty, media and fmcg indices dipping below their 200 day SMA. Interestingly, several other sectoral indices are still far above their respective 200 day SMA, with Nifty PSU bank, Nifty Metal and Nifty Auto trading the farthest at 17, 14 and 12% respectively from this key benchmark SMA. More importantly, only 9% of the small cap 250 index constituents are now trading above their respective 10 day SMA, indicating that this segment may have hit peak fear, raising the potential for a swing back in the coming week. Also, only 22% of this index’s constituents are trading above their respective mid bollinger band, suggesting reasonable room for upside. With earnings season about to kick off, the low base gives a perfect launchpad for stock specific upside surprises in the coming weeks.
FIIs stick to old habits
After showing signs of attempting to cover shorts and add longs, FIIs appear to have reverted to a strong bearish stance, which they have persistently held on to through the most part of the second half of last year, as evidenced by their positioning in the index futures segment. At over 2 lakh contracts, the index future short positions held by FIIs is their highest since mid October of 2025. Index future long positions have dipped to just 16500 contracts. Consequently, the long short ratio of FII index future positions has slipped to 7.5, also the lowest the since mid October 2025. The fact that Nifty did not fall back below the low of those lows, can be taken as a positive.
Profit Booking Hits Nifty Metal; Steel Stocks Under Pressure
The Nifty Metal Index, which has been on a strong upward trajectory since mid-2025, is now showing signs of profit booking that began earlier this week. The RSI has retreated from overbought levels, while the MACD is nearing a signal-line crossover. With the index hovering around the PSAR mark of 11,080 — a level likely to be breached — downside targets emerge at the 38.2% Fibonacci retracement of 10,973, followed by 10,777, before any meaningful recovery can be expected. Any rebound towards 11,200 is likely to face renewed selling pressure.
From a derivatives standpoint, half of stock futures saw short additions on Friday, while the other half experienced long unwinding on a weekly basis. Additionally, 45% of near-ITM and OTM call strikes recorded short additions, suggesting traders are positioning for further weakness in the near term.
On the stock-specific front, steel names were the biggest laggards, while aluminium and zinc counters showed relative resilience. Adani Enterprises was the largest contributor to the decline. Steel stocks are expected to remain under pressure, while others may limit their downside.
Nifty Realty: Weak Setup, Oversold Bounce Possible
The Nifty Realty Index saw a sharp pullback this week, despite breaking above the Supertrend level of 911 last week. The daily chart setup looks fragile, with the RSI slipping below its short-term moving average, the MACD nearing a bearish crossover, and a potential rising trendline breakdown in play. After five consecutive sessions of decline, hourly charts now show deeply oversold conditions, hinting at a possible short-term bounce early next week. However, caution is advised on such recoveries.
Derivatives data reinforces the bearish tone: 83% of stock futures saw short additions on Friday, while 67% added shorts on a weekly basis. Similarly, 83% of near-OTM call strikes witnessed short additions, signaling continued negative sentiment.
Stock-specific weakness was evident in DLF, Lodha, Godrej Properties, Oberoi Realty, and Prestige Estates, which remain vulnerable to further downside. This could drag the index closer to 850 in the near term.
First published in Financial Express
