On the hourly charts, the Nifty is trading below its 20-period exponential moving average (EMA), with the Relative Strength Index (RSI) struggling to hold above the 60 level since early October, reflecting limited buying momentum and upper levels acting as resistance zones.
As the index nears the critical psychological level of 24,000, where significant put writers (bulls) have taken positions, momentum indicators reaching oversold levels could prompt a temporary rebound.
Open Interest Trends
The Nifty closed the week with an open interest (OI) of 15.33 million shares, down from 15.61 million shares at the week’s start on October 18. This represents a reduction of 0.28 million in futures OI since the beginning of the week, coupled with a 2.71% drop in the index, indicating substantial unwinding of long positions.
FPI Long-Short Ratio Declines
The long-short ratio of Foreign Portfolio Investors (FPIs) saw a slight increase, with long positions rising to 36.71% by the week’s end, up from 33.57% at the start of the week on October 18, though still well below the 79.39% observed at the beginning of the October expiry. This trend indicates modest growth in FPI long positions as short positions have gradually reduced.
Key Weekly Series Levels
In the weekly series, the 24,500 strike holds notable call open interest with 295,090 contracts, while the 24,000 strike has strong put interest with 198,997 contracts.Active trading within the 24,200–24,500 call range and the 23,900–24,100 put range indicates resistance around 24,200–24,500 and support between 23,900–24,100.
Increased call writing in the 24,200–24,500 zone suggests sellers are establishing positions at lower levels, while reduced put positions underscore a bearish sentiment, with substantial institutional selling preventing the index from holding at higher levels.
Outlook for the Coming Week
As the index trades near its critical support zone of 24,000–24,100, with substantial put writer positions, oversold momentum indicators, and FPIs halting their selling streak to become net buyers over the past three days, a minor pullback appears possible. However, with strong resistance in the 24,500–24,800 range, this rebound may be short-lived, potentially prompting new short positions to be created by sellers. Declining open interest alongside the index’s drop suggests long unwinding.New short positions may be considered if the index falls below 24,000, likely intensifying profit-taking. While the index remains below the 24,700–24,800 levels, a ‘sell-on-rise’ strategy may continue to prevail.
Historical data shows that four consecutive weeks of negative closes usually prompt an average pullback of 1.00% within the following month, which traders should keep in mind during the upcoming week’s planning.
(The author is Derivatives Analyst, SAMCO Securities. Views are own)
