Broader market gets ready for large moves.
Unlike the week before, the last week succeeded in retaining the gains at close. While this adds on to the hopes that the recovery swings that have been on for while would progress into a sustainable uptrend, the subdued VIX restrains us from pencilling in large upside objectives right away. While we are ready to go in with expectations of 25400-600 for Nifty, sector or stock specific approach appear a better approach to play the market right now, given the extended period of decline in the preceding weeks, and how differently several sectors performed during such phase. On one end of the spectrum, we have IT index having 100% of their stocks rising above the middle bollinger band in the last week, while realty and bank nifty indices have just 40 and 50% of their constituents trading above their respective middle bollinger bands. While lack of major volatility as reflected in a VIX near 10 is a reflection of traders comfortable with present trajectory, it also hides the possibility of a vulnerability in the event of a surprise event. Favoured view however, does not expect such knee jerk reactions, as key indices and stocks does not appear to be at extremes that would other wise warrant collapse. Even in the event of dips, we remain optimistic of trend agnostic money that has continued to flow into stocks via SIPs to keep markets steady and upwardly bound.
FIIs begin unwinding bearish bets
FIIs who have been steadfastly piling on to short positions despite all the tail winds in terms of GST as well as increased rate cut bets, have now started unwinding such bearish bets. On Friday, they 6% to their index future long positions, while reducing their index future short positions by 4%. It is important to note the rise in long positions as it has been at record low. The rise may be taken as a sign that FIIs have begun to act on the positive news flow. At 26661, FII’s index future’s OI is at the month’s high, but is way lower than previous month’s. The longs still constitute just 11.8%, of the index future positions held by FIIs, and we need continued rise, to ride on short covering momentum.
Nifty Energy Index Signals a Rebound
Since June, the Nifty Energy Index had been sliding, but last week it pierced its falling trendline, clearing the way toward 35,288 (100-day SMA) and potentially 36,600 (100-week SMA).
Momentum indicators back this shift: the RSI is holding above 50, and the weekly MACD histogram is showing fatigue at lower levels, both hinting at a rally.
Derivatives data reinforce the bullish case—major constituents are seeing long build-ups or short covering, suggesting traders expect a near-term upswing. On the stock front, Reliance, Power Grid, Coal India, and Adani Power look primed to lead any advance.
Nifty Financial Services Index Poised for Further Upside
The Nifty Financial Services Index is edging toward a key supply zone around 26,460 (100-day SMA) and its declining trendline near 26,480. Despite this resistance, the weekly MACD histogram is flattening at lows, indicating more room to run.
Derivatives positioning is similarly bullish: about 80% of the index’s stocks display favorable setups, with near-term OTM puts and calls seeing short additions and long build-ups. Roughly 70% of stock futures added longs on Friday—a 40% week-on-week jump—signaling rising bets on continued gains.
Among individual names, ICICI Bank and SBI in banking, Bajaj Finance, Bajaj Finserv, Shriram Finance, and Muthoot Finance in lending, and insurers SBI Life, HDFC Life, and ICICI Lombard seem best wired to drive the index higher in the near term.
First published in Financial Express