The MSCI rebalancing and geopolitical tensions ensured that the long-serving 200-day SMA, which had held firm through multiple bearish onslaughts through the last fortnight, finally gave way. Surprisingly, it was not IT, the usual culprit, that broke the back of Nifty. On a week-on-week basis, financial services contributed 33% to the index’s fall, followed by 22% by IT. The bulk of the decline was contributed by HDFC Bank, followed by ICICI Bank and State Bank of India in the financial services sector.
Approximately 26% of the weekly upside was driven individually by the healthcare, metals & mining, and power sectors. In short, IT is continuing to drag Nifty down, and financial services, which were expected to push the index higher, are reversing their role; both are worrisome signs. That said, 80% or more of the constituents in PSU banks, pharma and metal indices are still trading above their respective 10-day SMA. While only 36% of Nifty 50 constituents are trading above this key benchmark, nearly 40% of the Midcap 150 index are trading above their respective 10-day SMA, suggesting that this is yet to evolve into a risk-averse trade.
FIIs dump longs again
The FII long-short ratio in the index future segment has returned to sub-20 levels, having dipped to 18.4 on Friday. This is a result of an 8% cut in longs and a simultaneous boosting of shorts by a near 13%. A deeper look into the data that has led to this figure gives interesting insights. We had started last week with FIIs boosting their index long positions to 90600 contracts, the highest since January 2025.
That had led most to assume that FIIs have truly turned a corner and are well poised to push the index higher. But the near 60% decline from this lofty level to that of Friday tells a different story. In comparison, the rise in shorts over this period is just under 11%, though in absolute terms, the increase in shorts is still significant, as the total holding now stands at 1,60,651 contracts.
Nifty Finance: Consolidation with a developing bearish tone
The Nifty Finance Index continues to consolidate after its sharp rebound, hovering near 27,870. On the daily timeframe, it remains well above the 200-DMA around 27,050, keeping the broader uptrend intact despite cooling momentum. However, the slip below the rising trendline support near 28,200 and the MACD signal-line crossover point to increasing bearish pressure.
The weekly chart echoes this weakness: although the index bounced strongly from recent lows, the small-bodied candles near earlier peaks highlight supply around 28,150–28,350. The formation of a bearish engulfing candle further underscores the emerging negative bias.
Derivatives data also leans bearish—nearly 90% of stock futures saw short additions on Friday, with about half showing week-on-week short build-up, reflecting traders’ expectations of near-term downside.
Support levels are placed at 27,650–27,500, with a stronger floor at 27,100–27,000. As long as these hold, the index may oscillate between 27,500 and 28,350 with a mild positive tilt. A close above 28,350 can pave the way toward 28,700–28,950, while a break below 27,100 risks weakening the trend toward 26,600–26,400.
Nifty Auto: Rising caution as momentum softens
The Nifty Auto Index, currently near 28,160, is showing early signs of fatigue after its rebound from February lows. While still above the 200-DMA, the daily setup reflects weakening momentum, with repeated failures to sustain moves beyond the 28,700 zone. The MACD remains positive but with a declining histogram, signalling fading bullish strength and growing buyer hesitation.
The weekly structure reinforces this cautious tone. The index is struggling to extend gains after defending the 27,200 breakout area, and alternating weekly candles with waning follow-through around 28,700–29,000 suggest that the uptrend is losing traction. The broader pattern now resembles a maturing rally with diminishing conviction on the upside.
Derivative trends echo this view—all stock futures added shorts on Friday, implying traders are positioning for further softness in the coming week.
First published in Financial Express.