A near 20% week-on-week rise in the Index Future long contracts to go with a 14.4% cut in index future short contracts of FIIs ensured that the long short ratio settled at 22, the first time since late February.
This time, what is more significant is the fact that the FII Index Future longs are above 80,000, the highest since May 2025. Meanwhile, their shorts settled below 3 lakhs for the first time since late March, but this is significantly above the 1.6 lakh levels seen in February, when the long-short ratio was at similar levels as now.
This suggests that the short-covering-led uptrend may have more legs.
Broader market stages smart recovery
While the upswing was visible through last week, lifting the majority of the indices and index constituents above their 20-day SMA, there is plenty of room to cover until the 50-day SMA is conquered.
This can either mean that the broader market revival may give way to stock-specific moves from here on, with Q4 numbers flowing in. Or that the bears may regroup. That said, among major sectoral indices, pharma and oil & gas remain the two sectors which have at least 40% of constituents trading below their respective 20-day SMA.
Nifty FMCG: Early Indications of a trend reversal
The Nifty FMCG index is beginning to display early yet meaningful signs of a potential trend reversal on the weekly timeframe. After a prolonged corrective phase, the emergence of a Morning Star candlestick pattern on the weekly chart points toward exhaustion of selling pressure and hints at a possible transition toward a more positive bias.
This technical signal is reinforced by the weekly MACD histogram, which is indicating exhaustion in bearish momentum, suggesting that downside risks may be limited from current levels.
From a price action standpoint, the index has witnessed a sharp rebound from lower levels, reflecting the emergence of strong buying interest near key support zones. Sustaining above recent swing lows will remain critical for a gradual improvement in trend structure, with room for a measured upside move toward prior resistance levels in the weeks ahead.
Derivative data lends additional credibility to the improving setup. Nearly 75% of FMCG stock futures have seen long additions on a weekly basis, while close to 55% registered fresh long positions on Friday, highlighting improving trader sentiment and accumulation at relatively lower levels.
On a stock-specific basis, heavyweight index constituents such as Hindustan Unilever, ITC, Nestle India, VBL, and Britannia have formed weekly reversal patterns, indicating further upside potential. These stocks are likely to act as key drivers, with the index potentially moving toward the 50,500-50,800 zone over the coming weeks.
Nifty Auto: Multi-timeframe reversal signals reinforce bullish outlook
The Nifty Auto index is displaying a well-defined bullish reversal structure across multiple timeframes, supporting expectations of further upside in the near-term. On the daily chart, the index has confirmed a SuperTrend breakout, signalling a clear shift in short-term trend dynamics. The RSI is trending higher and hovering around the 60 level, which reflects strengthening momentum and improving buying interest while still remaining comfortably below overbought conditions.
The weekly timeframe further strengthens the positive outlook, as the MACD histogram is showing signs of bearish momentum exhaustion – often an early indication of a broader trend reversal. This enhances the likelihood of a sustained recovery following the recent corrective phase.
Derivative positioning continues to align with the bullish narrative. A majority of auto stock futures have witnessed either long additions or short covering on a weekly basis, and approximately 55% recorded fresh long positions on Friday, underscoring renewed trader confidence in the sector.
From a stock-specific lens, key index heavyweights such as M&M, Maruti, TVS Motor Company, Eicher Motors, and Bajaj Auto have formed strong weekly reversal candle patterns, positioning them as potential leaders of the next leg higher. Overall, the index appears well placed to move toward 27,940 initially, with further upside potential toward 28,800, provided it continues to hold above recent support levels.
First published in Financial Express.