Despite a recovery on Friday, post a mid-week plunge, Nifty’s inability to clear the recent peak does ring some caution as we go into the new week. However, optimism persists as 61% of the Nifty 500 have managed to close above their respective 10-day SMA, the highest level last week, suggesting that risk appetite is strong.
Among sector-specific indices, media, auto and financial services indices are trading below their respective 10-day SMAs, but not by a large distance to be of concern.
FIIs: Bearish exposure still high
Meanwhile, Foreign Institutional Investors (FIIs) increased their long positions in the index future segment to 34,427 contracts. Thanks to a 9% jump in long positions on Friday, the week-on-week rise has come to 15%. Short positions also declined during the period, easing 2.88% to 289,138 contracts.
Even after this pullback, bearish exposure remains relatively high, with total short positions still around 3% higher compared with the previous week. Consequently, the long-short ratio of FIIs in the index future segment is at 10.6, below both the 30-day mean and 90-day mean, which are at 11.3 and 14.01, respectively.
Despite this, we are inclined to see the reduction in shorts and increase in longs on Friday, the trend to follow, especially as the long-short ratio is recovering from a near record low.
Against this backdrop, we highlight two sector themes that merit attention.
Bulls strengthen hold on Nifty Realty
The Nifty Realty Index has delivered a strong breakout from a prolonged consolidation phase on both the daily and weekly charts, reinforcing the continuation of its broader uptrend. This decisive move highlights strengthening bullish sentiment and suggests that buyers remain firmly in control.
Momentum indicators continue to support the positive outlook, with the weekly RSI comfortably holding above the 60 level, reflecting healthy trend strength and indicating potential for further upside.
The derivatives landscape also aligns with the bullish technical setup. Nearly 80% of the near out-of-the-money (OTM) Put strikes witnessed fresh short build-up, while a similar proportion of near OTM Call strikes saw long additions, signalling expectations of higher prices ahead.
Furthermore, close to 60% of realty stocks registered short covering on a week-on-week basis, indicating that market participants are reducing bearish positions and increasingly positioning for upside opportunities.
The combination of a multi-timeframe breakout, strong momentum readings and supportive derivatives activity points to continued outperformance from the sector. As long as the breakout zone remains intact, the index appears well positioned to advance towards its near-term upside targets of 960 and 1,000 over the coming weeks.
Nifty PSE displays early signs of bottom formation
The Nifty PSE Index is showing encouraging indications that the recent corrective phase may be approaching its end. The index has retraced towards the lower boundary of its rising channel and is attempting to establish stability above the important support region of 9,750-9,800.
Importantly, the weekly RSI has declined toward the 45 mark but continues to hold above previous swing lows, suggesting that downside momentum is gradually losing strength. Additional momentum indicators are lending support to the developing recovery thesis.
Although the MACD histogram remains in negative territory, it has begun to flatten, indicating that selling pressure is easing and bearish momentum is fading. The current rebound attempt is also taking place near the support of a widening wedge pattern, further reinforcing the significance of the prevailing support zone.
A decisive breakout above the 10,100-10,200 resistance band would strengthen the case for a bullish reversal and could open the path for a move towards 10,700. While near-term confirmation is still awaited, the broader technical structure remains constructive as long as the index continues to hold above its key channel support levels.
First published in Financial Express.
