Last week’s sell-off appears to have broken the back of the recent uptrend, as evidenced by the slippage below several sectoral indices below their respective 10-day SMA.
The Nifty Energy and FMCG indices are trading at least 2% away from their respective 10-day SMA, thus the farthest, while media, metal, pharma and oil & gas indices are also slightly above this average.
Meanwhile, the Nifty Auto is trading 2.5% below this benchmark average, the farthest after Nifty IT, which is over 7% below the 10-day SMA. Interestingly, while Nifty is 1.2% below the average, the Smallcap 100 Index is 1% above the 10-day SMA.
FIIs increase shorts
The supporting hand for Nifty that was expected from FII’s short covering appears to be easing. With a near 6% cut to 64025 contracts, the index long positions held by FIIs have fallen to the lowest since the beginning of April. Short positions were also boosted by 3.5% to drag the long to short ratio to 19.3, the first sub-20 level since the 7th of April.
Nifty FMCG: Consolidation phase within a positive medium-term trend
The Nifty FMCG index is beginning to exhibit early indications of a potential trend reversal, supported by gradually improving medium-term technical signals. On the weekly chart, the index has managed to move above the Supertrend indicator, while a positive MACD signal-line crossover suggests that upside momentum is slowly but steadily gaining traction.
That said, some near-term consolidation cannot be ruled out at current levels. On the daily timeframe, shrinking MACD histograms point to cooling short-term momentum, and the appearance of a bearish Marubozu candle reflects emerging profit-booking pressure. Despite these short-term pauses, the overall technical structure remains supportive, provided crucial support levels continue to hold.
From a derivatives standpoint, near-term indicators present a mixed picture. Recent data indicates that close to 60% of FMCG stock futures experienced long unwinding on Friday, which may exert some pressure on sentiment and possibly result in a cautious start to the upcoming week. However, zooming out to a broader timeframe reveals a more positive setup.
On a week-on-week basis, nearly 90% of FMCG stock futures have witnessed short covering, highlighting that despite intermittent profit-taking, the overall derivatives positioning continues to favour a constructive bias.
From a strategy perspective, a buy-on-dips approach remains advisable, particularly near established demand zones. Immediate support is placed around the 49,130 mark, while upside resistance is seen near 52,725 and subsequently around 54,500. A sustained breakout above these resistance thresholds could further strengthen the bullish continuation and open the door for higher levels over the coming weeks.
Nifty Energy: Short-term consolidation likely, medium-term trend intact
The Nifty Energy index has delivered a robust rally in recent sessions; however, short-term technical signals now point towards a possible phase of consolidation.
On the daily chart, momentum indicators are showing early signs of fatigue, with the MACD histogram flattening and the formation of a Doji candle, reflecting market indecision after the sharp upward move. Additionally, the daily RSI is hovering above 75, placing the index in the overbought zone and increasing the probability of a brief pause or mild pullback in the near-term.
Nevertheless, the broader technical outlook continues to remain encouraging. On the weekly timeframe, the index structure looks firmly positive, with the RSI holding above the 65 mark and still comfortably away from overbought conditions. This suggests that the underlying strength of the trend is intact and well-supported.
Overall, any near-term consolidation is likely to be a healthy development rather than a threat to the prevailing trend. As long as key support levels are respected, the medium-term bias remains constructive, and any declines are expected to attract fresh buying interest rather than lead to sustained weakness.
First published in Financial Express.
