Nifty Trend
By Dhupesh Dhameja, Derivatives Analyst at Samco Securities
The Nifty index recorded its steepest weekly decline of 4.77 percent, wiping out the gains accumulated over the previous four weeks. With the index closing below the 200-DEMA and maintaining a lower-high pattern, concerns about a continuation of the downtrend persist in the coming week, further exacerbated by ongoing geopolitical tensions.
This significant drop in the previous week has formed a Bearish Engulfing candlestick pattern on the weekly chart. On the daily chart, the index decisively broke below its pivotal 200-day exponential moving average (200-DEMA) while creating a series of lower highs. This sharp downturn signifies a robust return of bearish momentum, as buyers anticipating further upside were trapped.
The overall market structure appears to be deteriorating, with diminishing buying interest adding to the bearish narrative. With this move, the Nifty has convincingly breached the psychological support level of 24,000, signaling a notable shift in market sentiment. The 24,800 level now emerges as a formidable resistance zone. The index is currently hovering around its immediate support range of 23,500–23,200, bolstered by the 50-week exponential moving average (50-WEMA), a level that has historically acted as a strong support.
On the daily chart, the index has consistently failed to close above its previous highs, indicating persistent selling pressure at elevated levels. Moreover, the Nifty is trading below the key psychological resistance band of 23,800 to 24,000, a level reinforced by heavy call writing activity. This cautious sentiment suggests traders are skeptical about any immediate upside potential. Closing below the 200-DEMA, along with the RSI (Relative Strength Index) dipping below 40, further underscores the bears’ dominance.
Open Interest (OI) Trends
The week witnessed a significant surge in Nifty futures OI, climbing from 12.60 million shares to 14.62 million shares—an increase of 2.02 million shares. This sharp rise in OI, coupled with the 4.77% drop, signals aggressive short positions by bearish participants, highlighting the strength of negative sentiment in the market.
FPI Long-Short Ratio
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Foreign portfolio investors (FPIs) have drastically cut their long positions, with the long-short ratio plummeting to 31.20% from 38.69% at the start of the week. This decline reflects waning optimism among institutional players, further solidifying the bearish outlook.
Key Weekly Series Levels
Weekly options data indicates that the 24,000 strike holds the highest Call open interest, while the 23,000 strike has the largest Put OI. Intense activity in the 23,600–24,000 Call range and 23,500–23,000 Put range highlights immediate resistance at 24,000 and key support at 23,000. Heavy Call writing in the 23,600–24,000 range reinforces the prevailing bearish sentiment. The Put-Call Ratio (PCR) has dropped to 0.71, signaling that bears maintain a firm grip on the market. The surge in OI, combined with the index’s steep fall, suggests trapped buyers and sets the stage for a potential slide toward the next support level at 23,200.
Outlook for the Upcoming Week
The sharp decline from 24,000 has firmly established this level as a critical resistance zone. Immediate support lies between 23,300 and 23,500, reinforced by strong Put writing and the previous swing low. Holding this range will be essential for any meaningful recovery. On the upside, the 23,800–24,000 zone presents a significant barrier, as indicated by the option chain and price action. Sustaining above 24,000 could ignite short-covering rallies, driving the index toward 24,500.
The decrease in FPIs’ long positions and the rise in OI during the index’s steep drop confirm bearish sentiment. If the index breaches 23,500, it could trigger accelerated selling as buyers unwind their positions, potentially dragging the index down to the crucial support at 23,000. As long as the Nifty remains below the 23,800–24,000 zone, a “sell-on-rise” strategy is expected to dominate, paving the way for continued bearish momentum.
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