By Anand James

FIIs trim positions in F&O

After coming off extreme long proportions in index futures over the last fortnight, Friday saw FIIs reducing exposure across board, except for stock options, where they boosted their put longs by 29% and put shorts by 32%. Also, with another 11.2% cut in index future longs, it is now time to talk about the shorts slowly going to the other extreme. Shorts now constitute 64.1% of FIIs’ index future portfolio, with short OI ballooning to 1.78 times that of long OI. This is the highest short build up since June 2024.

Recovery attempts challenged

Though the recovery attempts appeared to fizzle away towards the week’s close, the broader market has given a few signs to expect more recovery attempts next week. Infact, Friday ended with 34% of NSE500 stocks above their respective 20 day SMA, when compared to 27.9% stocks above the key benchmark a week ago.

Meanwhile, on Nifty there are a few reversal patterns that are presently on the path to maturity that could avoid the present bounce back from fizzling out as a dead cat bounce. 

Our eyes are however on 24900, the fibo retracement of the recent low-high, as long as above which, we could see a push towards 25390 or even 25770 in an optimistic scenario. While this is the favoured trajectory, we do not think 24700 will defend a repeat attack, in which case we could be heading to 24370-23900, especially as fewer rate cuts are now expected for the rest of the year from the Fed than earlier.

That said with VIX slipping to the low 13s again suggesting that risk appetite is better than earlier. Hence, even though we fear 24900 could be threatened at some time during the week, the odds of a swift downside appear low.

Sector cues

Nifty FMCG Index has been on a profit booking mode for the last three weeks. The index had broken below the rising trendline support last week and continues to search for support. Nearest support for the index is seen around 61150 and 60900 from where we may see pull back.

Current situation warrants some more slippage with stocks like ITC, Nestleind, Britannia and Godrejcp adding to weakness. Hindunilvr, which forms around 1/4th of the Nifty FMCG index, could help arrest big falls.

Meanwhile, the Nifty IT Index moved within a tight range this week and possibly could be looking at a breakout sooner than later. Heavy weights, except Infy, are showing signs of a pull back in the short term. Number of stocks trading above their respective 20 and 50 DMAs have jumped above 60% this week compared to 20% last week indicating strength. Stocks like TCS, Hcltech, Techm, LTIM and LTTS could lead the bounce back.

(About The Author: Anand James is the Chief Market Strategist at Geojit Financial Services.)

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