Index future longs of FIIs plummeted to the lowest this month, dragging its proportion to the shorts also to 14.3, the lowest since February. This bearish positioning is also evident in the number of Index Put Options held. It is at its highest this month. While an increase in put longs by FIIs is in line with the trend usually seen as expiry approaches, where it diverges from the usual trend is the lack of rise in Put Shorts. This raises the suspicion that the bearish positioning is close to an extreme.
Broader market has slipped too fast
After playing around with the 50-day SMA for a few days, Friday saw Nifty decisively closing below the key moving average, raising fears of a plunge that could last as far as the 200-day SMA, which is near 24,000 now. Only 36% of the Nifty 50 constituents are trading above the 50-SMA, as opposed to 52% of them trading above it on Thursday. Incidentally, only 17.6% of the Smallcap Index constituents are trading above the 10-day SMA, suggesting that the recent decline has been sharp. Also, more than 50% of the Nifty 500 stocks are trading closer to two standard deviations from a 20-day mean. This also points to an extreme position that the broader market has moved into in a short span of time.
Sectoral cues: Sentiments remain weak in Nifty Financial Services and Realty Indices
Nifty Financial Services Index: The early upside seen this week faced selling pressure from higher levels, leading to a MACD signal break on the daily chart and a more decisive breakdown on the weekly scale—both pointing to fading momentum and a weakening outlook. Additionally, the monthly MACD histogram is showing signs of exhaustion at elevated levels, reinforcing the bearish bias. The weekly candle resembles an inverted hammer, which may attract some buying interest in the first half of the coming week. However, the sustainability of any rebound hinges on the index holding above the 27,000 mark. A breach below the 26,500–26,460 zone could accelerate the downside towards 26,100–26,000 levels.
From a derivatives perspective, sentiment remains weak. Nearly 40% of both ITM and OTM call options have seen short buildup. Moreover, 68% of index constituents added shorts on Friday, while 53% saw long unwinding on a week-over-week basis—indicating traders are positioning for further weakness. On the stock-specific front, while HDFC Bank and ICICI Bank have shown resilience, most other major constituents appear vulnerable to additional declines in the near term.
Nifty Realty Index: The Nifty Realty Index remains under persistent pressure, with last week’s recovery attempt failing to gather strength. The formation of a bearish The Marubozu candlestick on the weekly chart has reinforced the negative sentiment. Additionally, the weekly Relative Strength Index (RSI) has dipped below its moving average, underscoring the likelihood of continued weakness in the near term.
Technically, the index is currently positioned near the 38.2% Fibonacci retracement level. While a rebound toward 963 is possible, it may be met with selling interest. A decisive breach of the 963–960 support range could trigger a sharper decline toward the 910 level.
From a derivatives standpoint, sentiment remains muted. Approximately 40 percent of both in-the-money and out-of-the-money call options have witnessed short buildup. Furthermore, 50 percent of index constituents saw new short positions on Friday, with 33 percent showing short accumulation on a week-over-week basis. This indicates a broader expectation of further downside among market participants.
The average RSI reading across Realty Index constituents hovers around 45, suggesting there is still room for deterioration. Stock-specific trends continue to reflect weakness, with the exception of Phoenix. Major names such as Lodha, Oberoi Realty, Prestige Estates Projects, and Brigade Enterprises display particularly vulnerable technical structures, increasing the risk of additional declines.
First published in Financial Express
