Foreign Institutional Investor (FII) long-short ratio in the index future segment has risen to 16.8, the highest since late February. Thanks to a seven per cent boost to longs, the number of long contracts is now at 68058, the highest this year.
However, shorts are also at a whopping 3,36,078 contracts, an extreme suggesting that we are either about to see a massive short covering, or that FIIs have positioned themselves for even worse decline on the benchmark indices.
Broader market still in red
Apart from the IT index, only the metal and media indices have pulled back above their respective 10-day SMA. However, small-cap 100 and 250 indices have also pushed above this key moving average, suggesting that risk appetite is returning. Over 60% of the Small-cap 250 Index constituents are trading above their respective 10-day SMA.
On the other end of the spectrum, only 15% of the Nifty Financial Services index constituents are trading above this key moving average, which serves as an indicator of short-term bias.
Nifty Pharma at a crucial support zone
Nifty Pharma is approaching a potential near-term reversal area after undergoing a sharp corrective decline. The index has now retraced to a well-defined and technically important support zone, aligned with previous swing lows as well as the Supertrend base.
This convergence of supports suggests emerging buying interest and hints at possible exhaustion of selling pressure. Momentum indicators further reinforce this view, with the RSI drifting close to oversold territory and the MACD showing a clear contraction in downside momentum, thereby improving the overall risk-reward profile for a short-term rebound
However, derivatives positioning continues to reflect caution. Approximately 58% of stock futures recorded fresh short build-up on Friday, which expands to nearly 80% on a weekly basis, highlighting sustained bearish positioning.
Additionally, close to 65% long build-up in near-the-money (or over-the-money) OTM put options indicates that traders are still maintaining a defensive bias, hedging against further downside.
From a price-action perspective, there are encouraging signals. Key index heavyweights such as Sun Pharmaceutical Industries, Cipla, Zydus Lifesciences, Divi’s Laboratories, Dr Reddy’s Laboratories, and Torrent Pharmaceuticals have formed long-legged Doji candlesticks. This pattern reflects indecision after the recent decline and often precedes a short-term reversal or consolidation phase.
If follow-through buying emerges, the index could attempt an initial upside move toward the 22,300 level, while the 21,500-21,450 zone remains a critical support area to watch closely.
Metals: Short-term consolidation within a structurally intact uptrend
The metal index is currently witnessing a technical pullback within a broader and still-intact medium-term uptrend. From a charting perspective, prices are correcting from recent highs but continue to hold comfortably above the rising Supertrend indicator, reinforcing the view that the dominant trend remains positive.
The current decline appears more corrective than impulsive and is unfolding within an upward-sloping price channel, suggesting a pause rather than a reversal.
Momentum indicators reflect this cooling phase. The RSI has eased from overbought readings and is now normalising, indicating a healthy unwinding of excess momentum.
At the same time, the MACD has registered a negative crossover, highlighting near-term consolidation or limited downside risk as the market digests prior gains.
Derivatives data aligns well with this narrative. Nearly 60% of stock futures have seen long build-up on a weekly basis, signalling continued bullish participation beneath the surface. Meanwhile, around 35% long build-up in near-the-money OTM call options suggests expectations of range-bound movement rather than an immediate sharp upside, consistent with a consolidation phase.
From a stock-specific standpoint, several heavyweight constituents-including Adani Enterprises, JSW Steel, Tata Steel, Hindustan Zinc, Vedanta, and Hindalco Industries, together accounting for nearly 70% of index weight- have formed weekly reversal-type candles near key support levels. These formations point to dip-buying interest and enhance the probability of trend resumption once the current pullback runs its course. Overall, the bias remains constructively positive, with near-term consolidation likely acting as a base for the next directional move higher.
First published in Financial Express.
