A close above 26000 on Friday appears to be have given the much needed confirmation that Nifty is on the path of a sustainable uptrend. How far can we take this on face value, or do we need to look at the undercurrents as well, to check, how broad based this trend is, so that there will be more legs to the rally? One of the reason for this doubt is that Nifty’s recent rise has was courtesy of just a handful of its constituents. Another reason is that, what began as a Nifty centred uptrend never quite translated into small and mid cap rally as hoped, with the lag continuing to persist.
MF inflows in equity schemes encouraging
While the lag between large and smaller cap stocks persists, that has not dissuaded money from flowing into such stocks. In an encouraging signal, November’s AMFI data shows that small cap themed mutual fund schemes attracted 4407 crores, when compared to just 1640 crores into large caps. It follows that retail money has begun to take a risk on approach, even as FIIs continue to sell.
More small caps on the ascent
Friday’s positive close evoked both hope and concern, as previous Friday had also closed similarly in the green, only to give away all the gains in the subsequent days. What appears different this time is the number of small and mid cap constituents that have appeared to have pushed ahead. While 34% and 25% respectively of mid cap 150 and small cap 250 stocks closed above their respective 20 day SMA previous Friday, 40% and 32% of mid and small cap stocks respectively, closed above this benchmark last Friday, suggesting that momentum is higher this time.
FIIs’ Bias Turn Negative
With FIIs cutting their index future longs by 12.8%, their long to short ratio has dipped to 10, extinguishing whatever little signs that were beginning to be visible along a potential short covering spree, and consequent uptrend on the benchmark indices. The indices have been rising without needing help from such short covering, so far, but the build up in index future shorts and the even more sharper liquidation in index future longs, whose positions have fallen to the lowest since October, is a worrisome signal, especially with the indices at record peaks.
PSU Bank Index: Signs of Weakness Ahead
The Nifty PSU Bank index has displayed fatigue over the past month, with selling pressure emerging after last week’s breakdown of its rising trendline. The index now trades below the 20-day simple moving average, while weekly charts show a bearish Parabolic SAR breakout, pointing to potential downside in the weeks ahead.
Derivative data supports this view: nearly 60% of near-OTM call strikes saw short build-ups, and 57% of stock futures added shorts week-on-week, indicating traders are positioning for further declines.
On the stock front, SBIN, Bank of Baroda, PNB, Canara Bank, and Indian Bank have formed strong bearish reversal patterns on the weekly scale, which could drag the index toward the 8,000–7,800 zone in the short to medium term.
Realty Index: Attempting a Pullback, But Vulnerable
The Nifty Realty index has faced profit-booking since November and is now attempting a rebound. Despite this, it remains well below its 20, 50, and 100-day moving averages. On the daily chart, the Stochastic Momentum Index crossing above zero signals short-term positivity, with potential upside toward 800–815. However, weekly charts remain weak after a recent parallel support break.
Derivative trends are mixed: while Friday saw long additions in futures, overall weekly positioning still favors shorts, limiting upside potential. Stock-specific moves also lean cautious—names like DLF, Lodha, Godrej Properties, Oberoi Realty, Prestige, and Brigade may extend the current rebound, but sustainability looks doubtful.
First published in Financial Express
