The Nifty 50 index is now 4.3% below its 200-day SMA, in a sign that it is struggling in its attempt to shrug off bearishness. But interestingly, the Nifty Small Cap 100 index is still 2.7% above its 200-day SMA, suggesting that just like last time, the smaller caps are holding off and that risk appetite is still alive, it’s just that investors are picky.
Meanwhile, banks appear to be clearly struggling, with the Bank Nifty index having only 41% constituents above their respective 20-day SMA, even as 73% of the constituents of the Nifty 500 index were seen trading above their respective key SMA on Friday.
FII bearish position at extreme
We had noted last week that the supporting hand for Nifty that was expected from FII’s short covering was appearing to be easing. The long-to-short ratio of the FII Index Future portfolio has now plummeted to 7.8 from 20+ levels and is also the lowest since mid-March.
Though last week had only 4 trading days, the short positions were boosted 20%, while long positions were cut by a whopping 57% to 2,11,982 and 27,506 contracts respectively. While the previous week served as a warning towards potential weakness, the present positioning appears to be an extreme scenario from which a reversal is possible.
Rising wedge rejection flags near-term caution
The Nifty Financial Services Index is currently exhibiting signs of short-term vulnerability. On the weekly chart, the index has faced a clear rejection at the rising wedge resistance zone, a technical pattern that commonly denotes trend fatigue following a prolonged advance.
This rejection highlights the emergence of selling pressure at elevated levels, suggesting that supply is beginning to outweigh demand. Adding to this cautionary outlook, the daily chart shows the MACD registering a bearish crossover, confirming a loss of upward momentum and increasing the probability of a near-term pullback.
Derivative positioning further underscores the cautious bias. Nearly 60% of stock futures have seen fresh short additions over the week, while Friday’s data reflects widespread short positioning or long unwinding across most constituents.
Price action also mirrors this hesitation, with the index struggling near recent resistance levels and forming a sequence of lower highs after the recent rebound. Although the broader, long-term structure remains intact above key supports, the present technical and derivative setup points toward consolidation or a mild corrective phase.
As long as the index remains below the wedge resistance and MACD stays in bearish territory, the immediate outlook stays guarded, with downside drift likely toward the 25,100-25,000 zone before a potential base formation.
Bullish structure remains intact despite near-term consolidation
The Nifty Pharma Index continues to maintain a positive medium-term technical structure, even as mild short-term exhaustion becomes visible. Early-week consolidation cannot be ruled out, as daily MACD histograms reflect some fading momentum.
However, any such declines are expected to be shallow and are likely to attract buying interest, supported by a strengthening broader trend. The index has convincingly moved above its daily Supertrend level, signalling a shift toward sustained bullish alignment.
On the weekly timeframe, MACD has completed a bullish signal crossover, reinforcing the medium-term upside bias. This strength is further validated by the weekly RSI holding comfortably above the 60 mark, indicating robust underlying momentum and relative outperformance.
Derivative data also supports the bullish view, with approximately 70% of pharma stock futures witnessing long buildup or short covering on a weekly basis. As long as key support levels around 22,600 remain intact, the broader outlook stays constructive, with upside targets seen near 23,570 and 24,500.
Overall, the technical environment continues to favour the Pharma sector, pointing to potential ongoing outperformance in the weeks ahead.
First published in Financial Express.
